You've done your homework by evaluating your finances and determined how much house you can afford. So, here's a hypothetical question: which costs more? A $150,000 house or a $165,000 house?
It seems like a simple question. Assuming similar financing arrangements, monthly payments are going to be higher on the higher-priced property. But that's not the whole story. It's just as important to think long term rather than just month-to-month-in other words, not only how much the house will have cost after one year, but after 10 years as well. You may find that over time that $15,000 difference between the properties evaporates; you may also find that the difference can double.
Appliances can be pretty costly. Does one home have a washer and drier or a refrigerator that conveys at the sale? Purchase, delivery and installation of major appliances can add up quickly. What else about each house needs immediate attention? For instance, many older homes have non-standard size windows. If you need blinds for those windows, the blinds may have to be custom-made. Is that a back-breaker? Maybe not, but it's still a significant expense.
Is one of the homes in a location that causes you to use just one extra gallon of gasoline per day on your way to work? If you commute five days a week, that's about 20 gallons each month ... just to get to work and back. At more than $3 per gallon, that could be close to $8,000 over 10 years-a substantial number and almost half the original price difference. Now factor in your trips to the grocery store, school, daycare and other places you regularly visit. How does the location of the home affect your gasoline consumption when you go back and forth to these other destinations?
Does one house lie in an area, like a flood plain, that has different insurance requirements? Forty bucks a month may not seem like much, but multiply that by 120 months (10 years) and you get $4,800.
Evaluate the yard and the appearance of the exterior. If you find a home with a big tree that needs to removed, that is heavy-duty work-work that is better left to insured and bonded professionals. Maybe one of the homes will need a new fence in two years, whereas the other home has a brand new one.
What if one home is substantially older than the other? Older homes typically need more work than newer homes. Plumbing, electrical and HVAC components wear out over time and need to be replaced or repaired. Everything from the foundation to the roof can require attention. Resolving a major foundation issue can easily wipe out that initial $15,000 price difference. Fixing a big plumbing problem can be costly, too.
This is not to say that a newer home will not have problems or require attention. All homes require maintenance and repair. Upkeep on homes is a major factor in resale value. Little problems don't just go away, either. They can turn into big problems if they're not dealt with promptly.
This is not intended to scare you or dissuade you from buying a house-far from it. Take this as a piece of practical advice. After you figure out your price range, think about additional expenses not typically associated with monthly housing costs.
If you're trying to decide between two houses that have a substantial price difference, look beyond that initial difference. There's more to affordability than just figuring the mortgage payment and average utilities-there are factors that you may not consider and there are unanticipated expenses that will almost certainly arise.
While it's impossible to predict the future, and no one can guess if your plumbing or heater is going to fail this year, it's certainly possible to make an educated guess at how much living in a home will cost. Your Realtor can help you sort through these expenditures; this is the key to determining your buying power.
Whether you're interested in buying your first home, your next home, or just want to know more about home-ownership in general, I encourage you to check out a couple of great online resources: http://www.texasrealestate.com/ or http://www.har.com/ and for all of your Pearland TX and Northern Brazoria and Galveston County real estate needs, please visit my site at http://www.danfrankrealty.com. All of these sites offer tons of useful, real estate-related information geared specifically for Texans.
Danny Frank is a local Pearland TX Real Estate expert
This column was published in the 28Dec08 edition of the Galveston County Daily News