Real Estate Story

One Year Later: Lessons Learned and Real Costs of Buying a House

One year ago, my husband and I bought a house in the Cottonwood Heights neighborhood of Richardson. What an exciting and busy year — I’m a “nester,” so having a place that’s ours for keeps, as opposed to renting, feels more secure and comfortable. Plus I can finally paint whatever I want! 

As a real estate writer, I’m quite familiar with the concept of being “house poor,” and we wanted to avoid that at all costs. Being house poor describes a person who spends a big proportion of his or her total income on home ownership, including mortgage payments, property taxes, maintenance, utilities, and other expenses. We bought well below our max budget, which has allowed us to be able to afford the unplanned expenses of our first year. That is one of the smartest things we did. 

So what did our first year actually cost us? Read on to find out. 

Hard Costs for Buying the House

We ended up falling in love with the fourth house we saw, which was on the market at that point for six months, reduced multiple times. Because of that, we had leverage in our negotiations. We got a great price and the seller covered half of the closing costs. 

Hard costs from buying the house included the other half of closing costs plus escrow and prepaid expenses, which set us back in total about $6,500. There was also our $30,000 down payment and about $2,000 for a mover. That was an expensive month. 

We had an unpleasant surprise about four months ago. Our lender based our Richardson ISD taxes, part of our total monthly payment, on the 2015 assessment of the house. This place used to be run down, so that dollar amount was pretty low. Because house is a flip, the 2016 assessed value is quite a bit more. Like, more than double. This meant that, eight months into home ownership, our lender told us our escrow was $6,000 short. Yikes! We’re rolling that amount into our monthly payments over the next year. 

That new assessment also means our total monthly payment, including loan, PMI, insurance, and taxes, went up from $1,800 to $2,300 — and the $2,300 does not include the extra money for the tax shortfall. We are able to manage it, but if we had bought at the top of our budget, this monthly increase could have spelled disaster. Another reason to avoid being house poor. 

Fix-its and Repairs

A thorough home inspection during the home-buying process revealed a couple of issues the seller remedied. But once we moved in, there were a few more expenses: 

  • Electrical fixes: $600
  • New gutters in the backyard: $800 
  • Tree trimming mandated by city: $225  

Monthly Bills

Electricity, gas, water, and internet access run us roughly $350 a month, based on the season. Water is surprisingly expensive. The city of Richardson only allows us to run our sprinkler system two days a week, but we probably wouldn’t do it more even if we could because of the cost.  

Additional Expenses

We moved from an 1,400-square-foot townhome to a 2,500-square-foot house, so there was space to fill. Additionally, our furniture was a hodgepodge of styles and quality, so we decided to start from scratch in our living room and home office. I’m a dedicated bargain hunter and pretty thrifty, but I found myself willing to spend more for higher quality pieces that will last for years and work aesthetically, too. We did wait for sales, where possible, and I bought one of our desks off Craigslist. Obviously, this kind of list is highly personalized to each buyer — another’s mileage may vary bases on unique circumstances. Here’s a breakdown of our costs:

  • Wifi security cameras: $300
  • Home security system: $900
  • Refrigerator: $2,000
  • Furniture: $6,000
  • Painting bedroom, bathroom, and living room accent walls: $500
  • New garden bed and plants: $300

Future Expenses

We’ve got a running list of things we’d like to do to our house, as budget allows. Being able to space out these kind of discretionary expenses is a necessity. Sure, we’d love to have our landscaping done now, but we’d have to sell our teenager. Plus, we’re aware an unexpected, urgent expense might pop up and we need to have money on hand for that. Here’s what we want to do over the next five years or so:

  • Landscape design: $600
  • Plants and trees: $2,000
  • Painting: $400
  • Closet organization system: $900
  • Furniture replacement: $3,000
  • New lighting pendants: $800
  • New range: $2,000

Lessons Learned

So what are the bottom line lessons we’ve learned? 

  1. Always assume a house is going to cost you a lot more than just a monthly payment plus utilities. There are a host of both planned and unplanned expenses, especially in the first year, when it can feel like you’re hemorrhaging money. Make sure you’ve got savings. 
  2. Plan out optional expenses as much as possible and wait for sales. For example, we waited to buy our couch, side chair, and desk until the online shop had a 20 percent off sale. 
  3. Do what you can yourself. I painted the living room accent walls and guest bathroom myself, saving the cost of a professional painter. But for our master bedroom, which has a vaulted ceiling, I decided to call in a pro. 
  4.  Get a home warranty during the home buying process. While they wouldn’t cover the electrical fixes we needed to have done, it is comforting to know they would cover things like a broken pipe or a leaky roof. 

Do you have lessons you’ve learned during the home buying process? Leave us a comment below with your wisdom.

 

6 Comment

  • What great information Leah! I need to do a follow up on what it is like to sell for the first time!

  • Good points. I will add that you should always calculate the property taxes based upon the purchase price of the house. Any decent realtor or mortgage person should be advising the same.

    Also, being “house poor” is not always a bad thing, assuming income is rising. If you are not at peak income, then what makes you “house poor” today may not be the case in a few years. If you can buy a property that fits your current and future needs below your “max”, then that’s great. However, if not, don’t assume you will be able to “trade-up” to a house that fits your future needs – rising property values shut many people out of larger homes, better schools, ect.. Sometimes its better to stretch now to buy a property that meets your needs for the next 10+ years rather than assume that you can afford the upgrade later. As the past few years has shown, that is increasingly unlikely (absent a housing correction).

  • Great post…did you consider going back to the seller for the shortfall on the taxes assessed? If the final bill was indeed higher than estimated one year ago, you can get their portion from them. As for the shortfall collected, you will still have to deal with that, but the other part could be a couple hundred dollars back in your pocket.

    • It is easier said than done to collect from a seller on a shortfall. Just because it’s in the contract does it mean a seller will even egg knowledge much less comply with their obligation. Recently went through the same thing myself and ended up eating over $800 of the sellers share of a shortfall.

      • One more thing…
        Beware of buying from a flipper because there probably won’t be a homeowners exemption on the property and the taxes for the first year will be higher. In order to qualify for a homeowners exemption, you must be in the house on January 1 of a given tax year. This isn’t as big a consideration if you were buying a house towards the end of the tax year as it is if you were buying a house early in a tax year.

  • Tax increase cant legally go up that much in one year Sounds like something more to that story.