What First-Time Buyers Need to Know About the True Cost of Homeownership

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For many first-time homebuyers, the focus is on securing a mortgage and covering the down payment. However, beyond the purchase price, homeownership comes with a range of hidden costs that can quickly add up. Understanding these ongoing expenses is essential to ensuring financial stability after moving in.

Beyond the Mortgage: The Ongoing Costs of Owning a Home

While a mortgage payment is the most obvious cost of homeownership, additional expenses such as property taxes, homeowners insurance, maintenance, and utilities can significantly impact a homeowner’s budget. According to a Bankrate study, the average hidden cost of homeownership in the U.S. is approximately $18,000 per year.

Some of these expenses are unavoidable, while others can be managed with careful financial planning. Homebuyers should take these costs into account before making a purchase to avoid unexpected financial strain.

Major Homeownership Expenses to Expect

Property Taxes
Property tax rates vary by location and are based on the assessed value of the home. For example, in Miami-Dade County, a home assessed at $300,000 would incur annual property taxes of around $2,900, or roughly $240 per month. Homebuyers should research their local tax rates and factor this expense into their monthly budget.

Homeowners Insurance
A mortgage lender will require homeowners insurance, which protects against damage from fires, floods, and other disasters. It also provides liability coverage in case someone is injured on the property. The average annual premium for homeowners insurance is approximately $2,270 for a policy with $300,000 in dwelling coverage, which equates to about $189 per month.

Maintenance and Repairs
Unlike renters, homeowners are responsible for all maintenance and repairs, which can be costly. Common expenses include:

  • Roof repairs – Average cost of $1,150 for water damage or wear and tear
  • Plumbing services – Costs range from $45 to $150 per hour
  • HVAC maintenance – Annual service costs between $100 and $300

Additional expenses such as electrical repairs, mold remediation, and pest control can also arise unexpectedly, making an emergency fund a necessity.

HOA and Condo Fees
Homeowners in certain communities may be required to pay homeowners association (HOA) or condo fees, which cover maintenance, landscaping, and amenities such as pools or clubhouses. The average monthly HOA fee is around $200, but costs can vary significantly based on location and community features.

Utility Costs
Utilities, including electricity, gas, and water, are essential expenses that cannot be overlooked. The average U.S. household spends approximately $430 per month on utilities, according to Forbes. Some homeowners also include internet, phone, and streaming services in their monthly budget.

Landscaping and Exterior Upkeep
Homeowners must also maintain their property’s exterior. Landscaping costs can range from simple lawn care to more complex services like tree trimming, leaf removal, and drainage solutions. Professional landscaping services typically charge between $50 and $100 per hour, though homeowners can save money by handling some tasks themselves.

Financial Planning for Homeownership

Creating a Realistic Budget
A well-structured homeownership budget should account for all ongoing expenses, including mortgage payments, property taxes, insurance, utilities, and maintenance. One useful approach is the 50/30/20 budgeting rule, which recommends:

  • 50% of income toward necessary expenses like housing and utilities
  • 30% for discretionary spending on wants and non-essentials
  • 20% toward savings, including an emergency fund

Building an Emergency Fund
Experts recommend setting aside three to six months’ worth of expenses in an emergency fund to cover unexpected repairs or financial setbacks. A high-yield savings account with automatic transfers can make it easier to build this fund over time.

How to Minimize Hidden Homeownership Costs

Homeowners can take steps to reduce ongoing expenses and avoid unnecessary financial burdens.

  • Bundle insurance policies – Combining home and auto insurance can lead to discounts.
  • Appeal property taxes – If the tax assessment seems too high, homeowners can file an appeal for reassessment.
  • Learn basic DIY skills – Handling minor repairs and maintenance can significantly cut down on service costs.
  • Avoid HOA fees – Purchasing a home outside of HOA-governed communities eliminates monthly dues.
  • Consider a home warranty – A warranty can help cover unexpected repair costs for major home systems and appliances.

The Long-Term Impact of Homeownership Costs

Buying a home is one of the most significant financial decisions a person can make. While the hidden costs of homeownership may seem overwhelming, planning ahead and creating a financial cushion can make these expenses more manageable.

By being aware of these ongoing costs and preparing accordingly, homeowners can protect their investment and enjoy long-term financial stability.

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What Buyers Should Consider When Choosing Between New Construction and an Existing Home

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Homebuyers face a crucial decision when entering the market: purchasing a newly built home or opting for an existing property. Each choice offers unique benefits and drawbacks, influenced by factors such as budget, location, maintenance needs, and long-term goals.

Understanding the differences between these options can help buyers make an informed decision based on their personal circumstances.

Weighing Key Considerations Before Buying

The decision between a new home and an existing home largely depends on a buyer’s long-term plans and financial situation. Several key factors should be considered before making a final choice:

  • Budget constraints – While new construction can come with a higher price tag, existing homes may require additional costs for repairs and updates.
  • Timeline for moving in – Buyers who need a home immediately may prefer an existing property, while those who can wait might opt for a new build.
  • Location preferences – Established neighborhoods often have existing homes, whereas new developments tend to be on the outskirts of cities.
  • Maintenance and warranties – Newly built homes come with modern materials, warranties, and energy-efficient features, while older homes may require more upkeep.

Both options come with trade-offs, and determining the best fit depends on what a buyer prioritizes in a home purchase.

Advantages and Drawbacks of New Construction

New homes are built with the latest materials and often feature energy-efficient designs. Buyers can choose between production homes—built within a larger subdivision with limited customization—or fully custom-built properties designed to their exact specifications.

Pros of New Construction:

  • Customization – Buyers can select finishes, layouts, and design elements to suit their taste.
  • Energy efficiency – New homes often feature modern insulation, appliances, and HVAC systems, reducing utility costs.
  • Lower maintenance – Structural components and appliances are new, minimizing immediate repair needs.
  • Warranties – Many new homes come with warranties covering structural elements and major systems for several years.

Cons of New Construction:

  • Higher costs – Custom-built homes tend to be more expensive, and even production homes can carry a premium price.
  • Construction delays – Supply chain issues or labor shortages can extend the timeline for completion.
  • Less established neighborhoods – New developments may lack mature landscaping, nearby amenities, or a strong community presence.

Although new construction often costs more upfront, buyers benefit from fewer repairs and modern features that align with current building standards.

Existing Homes: Pros and Cons

For those seeking character, convenience, and well-established surroundings, purchasing an existing home may be the better choice. Older homes tend to be located in desirable areas with mature trees, local amenities, and developed infrastructure.

Pros of Buying an Existing Home:

  • Lower purchase price – Older homes are often less expensive than new construction, depending on the location and condition.
  • Move-in readiness – Buyers can close and move in relatively quickly without waiting for construction.
  • Established neighborhoods – Many existing homes are located in desirable areas with schools, businesses, and parks nearby.
  • Unique architectural details – Older properties often feature craftsmanship and design elements not found in modern builds.

Cons of Buying an Existing Home:

  • Higher maintenance needs – Aging roofs, plumbing, and electrical systems may require costly updates.
  • Outdated layouts – Some older homes may have smaller rooms, fewer bathrooms, or designs that don’t align with modern preferences.
  • Increased competition – In areas with low housing inventory, bidding wars for desirable homes can drive up prices.

While existing homes can be more affordable initially, buyers should budget for potential upgrades or renovations needed to modernize the property.

Which Option is Best?

The choice between a new home and an existing property depends on a buyer’s financial position, flexibility, and willingness to take on maintenance. Those prioritizing customization, energy efficiency, and low-maintenance living may lean toward new construction. Meanwhile, buyers looking for affordability, established neighborhoods, and quicker move-in timelines might find existing homes a better fit.

For those uncertain about which route to take, working with a knowledgeable real estate agent can help navigate the decision. Regardless of the choice, securing mortgage preapproval ensures a buyer is financially ready to make a competitive offer when the right home comes along.

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Understanding the Full Cost of Buying a Home

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Buying a home is an exciting milestone, but it also comes with a variety of costs beyond just the purchase price. To make a well-informed decision, it’s important to understand the full financial picture. From the down payment to ongoing expenses, knowing what to expect can help you budget effectively and avoid surprises.

The Down Payment

The down payment is the initial amount you pay upfront when purchasing a home. While the traditional advice has been to put down 20%, many buyers today qualify for mortgages with down payments as low as 3%. Some first-time buyers may also be eligible for down payment assistance programs, which can help reduce upfront costs.

A higher down payment can reduce your monthly mortgage payment and may allow you to avoid private mortgage insurance (PMI). However, even if you make a smaller down payment, budgeting for other costs will be essential.

Closing Costs

Closing costs are additional expenses due at the time of purchase, typically ranging from 2% to 5% of the home’s price. These costs vary depending on the loan type, lender, and location. Comparing loan estimates from multiple lenders can help buyers find the best terms and potentially reduce closing costs.

Closing costs generally fall into four main categories:

  • Lender Fees: These include loan origination and processing fees, as well as appraisal fees to determine the home’s value.
  • Settlement and Title Fees: These cover title searches, title insurance, document preparation, and transfer fees. Some states require attorney fees as well.
  • Third-Party Fees: These may include homeowners insurance, home inspections, and real estate agent commissions (typically paid by the seller).
  • Taxes and Government Fees: Property taxes, recording fees, and in some states, transfer taxes or tax stamps are required.

Earnest Money Deposit

An earnest money deposit is a sum of money that buyers submit with their offer to show they are serious about purchasing a home. Typically ranging from 1% to 3% of the home’s price, this deposit is held in escrow until closing. If the sale goes through, it is applied to the down payment or closing costs. However, if the buyer backs out for reasons not covered in the contract, they may lose the deposit.

Private Mortgage Insurance (PMI)

If a buyer puts down less than 20% on a conventional loan, lenders may require private mortgage insurance (PMI) to protect themselves in case of default. PMI can be paid as an upfront fee at closing or added to the monthly mortgage payment.

Once the homeowner reaches 20% equity, they can usually request to remove PMI. Some government-backed loans, like FHA loans, require mortgage insurance for the life of the loan unless refinanced.

Monthly Mortgage Payments and Escrow Accounts

A homeowner’s monthly mortgage payment consists of several components, commonly referred to as PITI:

  • Principal: The amount borrowed.
  • Interest: The cost of borrowing the money.
  • Taxes: Property taxes owed to the city or municipality.
  • Insurance: Homeowners insurance and, if required, PMI.

Many mortgage lenders set up escrow accounts to collect property tax and homeowners insurance payments as part of the monthly mortgage payment. The lender then pays these bills on the homeowner’s behalf. This helps homeowners avoid large annual or semi-annual expenses but increases the total monthly payment.

Moving and Utility Costs

Moving into a new home comes with a range of costs that can quickly add up. Expenses include:

  • Moving services or truck rentals
  • Packing supplies such as boxes and tape
  • Utility setup fees for electricity, water, gas, and internet
  • New furniture and home essentials

Understanding local utility costs can also help buyers budget for monthly expenses based on the home’s size and location.

Unexpected Homeownership Costs

Owning a home also means preparing for unexpected expenses. Appliances break down, plumbing issues arise, and roof repairs become necessary. Experts recommend setting aside at least three to six months’ worth of essential expenses in an emergency fund to cover repairs, job loss, or other financial setbacks.

Homeowners Association (HOA) Fees

Some homes, particularly those in planned communities, condominiums, or townhouses, require HOA fees. These fees can be monthly, quarterly, or annual and go toward maintaining community amenities, landscaping, and shared spaces. Before purchasing a home, buyers should review HOA regulations and fee structures to understand how they impact their budget.

Preparing for Homeownership

Beyond the mortgage payment, responsible homeownership requires budgeting for property maintenance, insurance, and future expenses. Understanding all the costs involved will help buyers make confident decisions and set themselves up for long-term financial success. By planning ahead, homeowners can enjoy their new space without unexpected financial stress.

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The First Time Homebuyer

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A first-time homebuyer is an individual who has never owned a home before or has not owned a home for at least the previous three years. In certain tax scenarios, the IRS defines a first-time homebuyer as someone who has not owned a home in the prior two years. Understanding this classification is crucial because it determines eligibility for specific financial benefits, such as down payment assistance programs and first-time homebuyer tax credits.

Purchasing a home is a significant financial decision that requires careful planning and preparation. One of the first steps for first-time homebuyers is assessing their financial situation. This includes reviewing their credit score, calculating their debt-to-income ratio, and determining how much they can afford for a down payment and closing costs. A higher credit score often leads to more favorable loan terms, while a lower score might require a larger down payment or result in higher interest rates. The debt-to-income ratio is another key factor, as it helps lenders determine how much mortgage debt an individual can responsibly manage.

The down payment is one of the most critical aspects of buying a home. While a 20 percent down payment is ideal to avoid private mortgage insurance (PMI), there are loan options available that require much less. Conventional loans can have down payments as low as 3 percent, while FHA loans require a minimum of 3.5 percent. VA and USDA loans typically do not require any down payment, making homeownership more accessible to qualified buyers. Additionally, first-time buyers should factor in closing costs, which typically range from 2 percent to 5 percent of the home’s purchase price.

Once financial preparedness is in order, selecting the right mortgage type is the next step. The primary choice is between a fixed-rate and an adjustable-rate mortgage (ARM). Fixed-rate mortgages offer stability with consistent monthly payments, making them ideal for buyers planning to stay in their home long-term. ARMs, on the other hand, start with lower interest rates for an initial period before adjusting periodically, making them more suitable for those who may sell or refinance in the near future. Loan terms also play a role in affordability—15-year loans come with higher monthly payments but lower overall interest costs, while 30-year loans offer lower monthly payments with a longer repayment period.

Shopping around for mortgage lenders is another important step. Interest rates and loan terms can vary significantly between lenders, so it is beneficial to obtain quotes from at least three different providers. Some lenders offer free rate quotes online, while others require direct communication. Comparing not just interest rates but also fees and annual percentage rates (APR) ensures that buyers get the best deal. Once a lender is selected, obtaining a preapproval letter strengthens a buyer’s position when making an offer on a home.

After securing a mortgage preapproval, finding a real estate agent is essential. A knowledgeable agent can provide valuable insights into the housing market, help navigate listings, and assist in negotiations. It is beneficial to interview multiple agents to find someone who understands the buyer’s needs and preferences. The right agent will provide guidance on the home search process, neighborhood research, and property evaluations.

The home search process involves browsing listings, attending open houses, and scheduling showings. Buyers should have a clear list of priorities, such as location, size, and features, to streamline the search. Once a suitable home is found, the next step is making an offer. A strong offer includes a competitive price, contingencies such as inspection and financing clauses, and a timeframe for response. In competitive markets, buyers may need to act quickly and be prepared for counteroffers or bidding wars.

Once an offer is accepted, the mortgage application process officially begins. Buyers will need to submit financial documents, such as pay stubs, tax returns, and bank statements, for lender verification. This step also involves finalizing loan terms and securing a home appraisal. The appraisal ensures that the home’s value aligns with the loan amount, protecting both the buyer and lender from overpaying for the property.

A home inspection is another crucial step in the buying process. A professional inspector evaluates the condition of the home, identifying potential issues with the foundation, roof, plumbing, electrical systems, and more. If major problems are uncovered, buyers may negotiate repairs with the seller or reconsider the purchase. While inspections add an extra cost, they provide peace of mind and prevent unforeseen expenses after moving in.

As the closing date approaches, buyers must secure homeowners insurance, which is required by lenders to protect the property from damage or loss. Shopping around for insurance quotes ensures the best coverage at competitive rates. Buyers should also plan their move by arranging for utilities, internet, and any necessary repairs or upgrades before move-in day.

Closing on a home is the final step in the buying process. This involves signing legal documents, transferring funds for closing costs and the down payment, and officially taking ownership of the property. Buyers should review all documents carefully and be aware of potential scams, such as fraudulent wire transfer instructions. A final walkthrough of the home ensures that it is in the agreed-upon condition before the closing meeting.

Being a first-time homebuyer comes with advantages and challenges. Many state and local programs offer assistance with down payments and closing costs, making homeownership more accessible. Some buyers may also qualify for mortgage credit certificates, which provide a dollar-for-dollar federal tax credit. However, first-time buyers should be prepared for the financial responsibilities of homeownership, including maintenance, property taxes, and unexpected repairs. Planning and budgeting accordingly can help ensure a successful transition from renting to owning a home.

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Sunset at the Landing Concert Series, March 21, 2025

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Past concerts include performers such as The Steve Anderson Band in Covington.

Sunset at the Landing Concert

Columbia Street Landing on the Bogue Falaya River
100 N. Columbia St.
Covington, LA 70433

March 21, 2025
6PM – 9PM

Free Event!

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Playmakers Theater presents “They Promised Her The Moon”, March 15 – 30, 2025

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Come see this production live in Covington.

They Promised Her the Moon

Playmakers Inc.
19106 Playmakers Rd
Covington, LA 70435

March 15 – 30, 2025
Every Saturday 7pm and Sunday 2pm

Tickets: $15 – $30 

Click Here for More Information.