What does it take to afford a home in Louisville, Kentucky?
This page is geared towards the first time home buyer and hopefully gives some guidance.
- Mortgage payment--this will be your big line item. Your mortgage payment is what you send the bank for interest and principal reduction. More than likely, there will be escrow costs for home insurance and property taxes. There will also be PMI payments if applicable.
- Taxes--for budgeting purposes, figure about 1% of your home’s valuation. This can vary some due to extra city and county taxes. If you have borrowed money on the house, it will probably be escrowed.
- Home insurance--this will correlate with the costs of your home and insured contents. It will probably be escrowed and be part of your monthly payment to the bank.
- PMI--is mortgage insurance. Some mortgage companies require this; others recommend it. It ensures that the mortgage is paid due to some unforeseen circumstance.
- HOA fees--Home Owner Association fees are very common in Louisville and surrounding cities. Fees for subdivisions can be $10 a month for a basic subdivision to $100 a month for a higher end subdivision. Condo/HOA fees are typically higher. They may include lawn maintenance, snow removal, exterior upkeep, and even electricity in some developments. These may be included as part of your escrow payments.
- Maintenance--a good number is 1 % of the cost of your home. Budgeting 2-3% would be even better. If it is a new house, the repairs will not be as much of an issue.
- New homes--do not normally have a lot of maintenance. What they do have are costs for window treatments, window blinds, throw rugs, etc. These costs can add up as the house is set up for the first time.
- Water and sewer--the size of the family will directly influence the amount of water used. The sewer bill is about what the water costs. In Jefferson County, we also pay MSD for drainage. If you water your grass with a hose, you will still pay sewer costs. A second meter dedicated to lawn use will save you the sewer costs. During the summer months, it would not be unusual to have a $100 per month water bill.
- Electricity and natural gas--a lot depends on your comfort level. The size of the house is important, as is the age and how well insulated it is. Perhaps the seller would provide their bills for the last year.
- Garbage service--$15 per month will get you close enough for budgeting purposes. Be aware that some cities and HOAs provide garbage service as part of their fees and/or taxes.
- Cable TV--this number can vary from zero for bookworms to well over $100 per month.
- Telephone--this number can vary also. A land line can cost $25-$75 per month. A growing number of people only use their cell phones.
- Income taxes--first recommendation is to consult with a tax professional. Now, in general terms, you have tax benefits of deducting your home interest payments on schedule A. An increase in value of your home is generally not taxable. If it is not your primary residence, any gains would still be taxed at the capital gains rate.