Ongoing Home Buying Costs
Once you’ve purchased a home, you’ll also need to stay on top of the long-term expenses related to owning the house.
Mortgage Payments
Your monthly mortgage payments will consist of two main components: payment toward your principal balance (the total amount borrowed for the home loan) and interest. A chunk of your payment will also typically go toward property taxes and homeowners insurance.
Mortgage Insurance
Depending on the type of home loan you’re using – and in the case of a conventional conforming loan, the size of your down payment – you may be required to pay mortgage insurance.
This protects your lender if you default on the loan. Mortgage insurance, in the form of what’s known as MIP, is required on FHA loans for at least 11 years but can be dropped later with a down payment of 10% or more.
HOA Fees
If the home you’re buying is in a community with a homeowners association (HOA), you’ll likely have to pay HOA fees. These charges help fund certain services and amenities, such as trash removal, security, and access to a community pool.
To better estimate your monthly mortgage payment amount, use the Rocket Mortgage® mortgage calculator.
Monthly Expenses
There’s no one-size-fits-all answer for how much you should spend on your first home. But, a good rule here is to avoid spending more than 28% of your gross income on your monthly mortgage payment. Based on this percentage of income, you can determine the home price you can afford, and ultimately how much cash you’ll need to buy a house.
