If you’re a first-time home buyer who has never owned a home and just bought a home in California, there’s a chance you’re thinking about what type of new expenses will you have.
Not surprisingly, many homeowners in the Golden state are satisfied with their purchase due to the evidence that owning a home in California has turned out to be a wise investment.
If your home is in one of California’s larger cities, like the San Francisco Bay area or Los Angeles – Orange County metro this is especially the case. Numerous benefits can be gained by owning a home. However, home ownership is also accompanied by many responsibilities too.
As a homeowner, when you have problems you cannot call on your landlord or the maintenance person to handle it. You are directly responsible for taking care of all the repairs, the property taxes, replacing appliances, or anything else.
Not all, but most California home owners will come across dealing with the following expenses:
- Homeowners insurance
- Property Taxes
- Home maintenance and
- HOA fees
- Private mortgage insurance (PMI)
Home Insurance
This may not be a new expense for you if previously had renters insurance on the home or apartment you were renting. Homeowner’s insurance covers you in case your home is robbed or damaged by fire or weather events. In California, this is calculated at .0035 * cost of home. You may want to add optional earthquake insurance too.
Property Taxes
This is another expense which is often overlooked by new home owners as they tend to calculate just the principal & interest portion of the mortgage on their new home. Property taxes are usually assessed and required at the county level. Some counties impose an additional tax.
Orange County has the Mello-Roos tax in some newer home developments. Generally, property taxes are based on the value of your home multiplied by 1.25% and due every six months. If you become late on paying your property taxes, late penalties are added to the amount due . If you become severely behind, the state may place a lien on your home, for the amount due and if not paid for five full years may put your property up for sale.
Home Maintenance and Repairs
When you purchase a home, the homeowner is the one directly responsible for taking care of your place. If an appliance stops working or a floor tile is broken or cracked, you’ll have to pay for the repair costs. If your air conditioning or heating starts to malfunction, or your roof starts leaking, you’ll be the one to pay for these costs. This can add up a lot and surprise your bank account if you didn’t get a professional home inspection prior to buying the home.
HOA Fees
If you purchase a condo in California, the payment of a Homeowners Association (HOA) fee will be required. HOA fees are assessed to pay for a variety of maintenance costs in common areas of the community, such as landscaping, trash pickup, recreational facilities, cable TV.
Based on the condo community you select, condos HOA fees can range from just a couple hundred dollars a month to $2,000 per month, or more. See if the community had any special assessments for replacing the roof or other 5-10 year large expense repairs.
The repair can be on a totally separate building in the community but all owners share the expense. Some detached home and townhome communities also have HOA fees. Check into it with your realtor.
Private Mortgage Insurance (PMI)
Not every California State home owner will need to obtain Private Mortgage Insurance, Many home buyers who bring in a down payment less than 20-percent will need PMI or they may be able to get a loan with PMI built into the rate. When you purchase a home, you’ll need to figure out which way you want to go, because this expense can be considerable.
How to Prepare for These New Expenses
Aside from educating yourself about these expenses, you should have, or save, some funds dedicated entirely for these types of home ownership expenses. If you fail to plan for these expenses, they can really add up and make the experience of owning a home not enjoyable. Whether you’re buying a home in Aliso Viejo, Mission Viejo, Laguna Niguel, San Juan Capistrano, or any other area in California, being prepared for these expenses will make the transition to home ownership enjoyable.