HUD Articles

By Clare Trapasso

Jul 11, 2023

Q:How much can I afford to spend on a home?

That’s a tricky question because there’s no one-size-fits-all answer to it. Buyers can check out the Realtor.com® affordability calculator to get a sense of how much house they can afford. But the exact amount depends on your personal circumstances.

Experts recommend that buyers don’t spend more than 28% to about a third of their gross income, which is how much they earn before taxes, on their monthly mortgage payments. These payments typically include property taxes, insurance costs, and homeowners association fees.

But I believe this percentage is still too high for many first-time buyers. Unfortunately, this may mean postponing homeownership or purchasing a cheaper property. Stressed-out first-time buyers eager to get on the property ladder might not appreciate this advice, but take it from me: Buying—and owning—a home is so much more expensive than most people realize.

While many people buy homes to keep their housing costs fixed, property taxes, home insurance costs, and HOA fees can rise substantially over time. In fact, many local governments are now planning to hike property taxes to get their bite of rising home values over the past few years.

In addition, insurers stretched thin by the steady parade of natural disasters are raising rates in many areas. And it’s not uncommon for a co-op, condo, or subdivision to raise its HOA dues to pay for various improvements.

That’s why buyers shouldn’t max out their budgets to afford a home. You need to make sure you have more than enough each month to pay for child care, health care, or whatever else life throws at you.

Ahead, I’ve outlined a few hidden costs that come with buying and owning a home–and a couple of tricks for saving money where you can.

Energy usage

Energy costs are generally higher in a four-bedroom house than in a one-bedroom apartment. I bought my first home in late 2021 with my now-spouse. We were not expecting our energy bill to more than triple that winter.

Sure, there were things we could do to lower it. We called an energy specialist who advised us to change out our windows and insulate the eaves in our home. For spending tens of thousands of dollars on these improvements, we would be rewarded by saving a few percentage points on our monthly energy bills. Understandably, we decided to wait on those expensive suggestions.

Home maintenance

Another thing I didn’t fully understand is just how much maintenance a home requires. Gutters have to be cleaned, boilers need tuneups, lawns must be seeded and mowed. Some of it we were able to do ourselves, but some of it required calling in professionals.

And if homeowners let small problems become larger ones, they generally cost more to fix.

Unexpected repairs

Then there are the unforeseen repairs, such as basements that flood, electrical issues, and tubs that need caulking to prevent water damage.

In my first year of homeownership, I spent $800 on poison ivy removal after the noxious vine wrapped itself around the roots of the hedges lining my property. We couldn’t figure out how to kill it without taking out our hedges along with it.

Replacement of big-ticket items

Major appliances and home systems have a shelf life, which means eventually they will die. So you might be saddled, unexpectedly, with springing for a new stove or dishwasher—or even a dreaded roof replacement. These aren’t cheap.

Home furnishings and decorations

Oh, and those costs are on top of any furniture you’d like to buy, walls you’d like to paint or wallpaper, and landscaping work you’d like to have done.

That’s why it’s wise to give yourself as large of a financial cushion as possible.

Home inspectors can save buyers money

You might be able to minimize the financial blow of buying a house by tucking a home inspection contingency into your offer when you’re bidding on properties.

During the COVID-19 pandemic, many buyers waived this and other contingencies to make their offers more appealing. But as the housing market has cooled, contingencies have come back—and they can save you quite a bit of money.

A good inspector will be able to tell you if there are any visible problems with the home. Armed with that information, you can then renegotiate with the sellers and see if an agreement can be reached to fix those issues. This way someone isn’t buying a house and then finding out a week later that there are pricey plumbing issues or a crack in the foundation that needs to be fixed for $50,000.

But remember: Even the most skilled inspectors won’t catch everything. And unfortunately, there’s no way of knowing with certainty when a refrigerator will die or the property will be infested with termites.

Lenders might offer more money, but buyers don’t need to take it

You might be thrilled if you find a lender who qualifies you for a loan large enough to buy the house of your dreams. But think carefully before you take the offer.

Make sure there’s enough room in your budget for larger mortgage payments, maintenance, repairs, and unexpected replacements, as well as the cost of just living. You might need child care, have to replace an aging vehicle, want to go on vacation, or go to a game once in a while. And you shouldn’t forget that inflation means your expenses will likely continue to rise.

That’s why it’s more financially prudent to purchase a property with manageable monthly mortgage payments, even if it’s not your absolute dream home. After all, no one wants to be house poor.

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