The stock and bond markets are always in the news. Lately it has been the impact that thefuture of “artificial intelligence” has on various company’s stock prices. "Insatiable demand" for one company's (Nvidia) artificial intelligence chips has lifted its stock price so much that it is now valued at more than $2 trillion… we’ll see if it is “tulip bulb mania” all over again. But the action has helped propel the broader stock market. Meanwhile, in the bond market, Orion’s brokers know that investors have been walking back expectations for Federal Reserve rate cuts, so we could see mortgage rates waffling around at these levels for a while.

But our brokers also know that mortgage rates are only one part of the equation for homeowners, and for those contemplating buying. Brokers are in an excellent position to advise clients that if they’re preparing to join the ranks of homeowners, it’s important to understand the costs involved and budget for them. Broadly speaking, expenses include the monthly mortgage payment, home maintenance, homeowners’ insurance, and utilities.

Buying a home usually involves your client having set aside cash for the down payment, usually ranging from 3-20 percent of the purchase price. Orion has some fine low down payment programs. The down payment amount will determine if mortgage insurance needs to be paid. But there are more costs associated with buying a home than simply that expense. It could be tempting for your client to make a large down payment as possible to help minimize the monthly mortgage payment and avoid mortgage insurance, but doing so can leave little wiggle room financially for the additional costs associated with your client’s home in the future.

New borrowers should be prepared for closing costs that cover things like title insurance, title search fees, appraisal costs, escrow or attorney fees, surveying, lender fees, and an assortment of smaller items. Closing costs can vary based on factors such as the purchase price of the property, but your client can expect to pay an estimated amount somewhere between 3-6 percent of the loan amount in closing costs.

After the loan closes, anyone who financed their home will have their monthly principal and interest, as well has property tax which may be included in the monthly payment to the company handling (servicing) their loan through an escrow account. Property tax, based on the value of the property, is paid to the local government, and usually goes towards funding public schools, public works, libraries, parks, city government, and maintenance.

Homeowner’s insurance is often paid each month instead of a lump sum once a year. Your client will work with an insurance provider to determine the coverage of the policy, but standard home insurance typically provides protection against certain unexpected events, like damage caused by a fire or a break-in. Policy specifics will vary.

Unlike a rental where your client may only pay for gas and electricity, when they own a home, they are responsible for all utilities, which can include water, gas, heat, electricity, internet, sewer, and trash/recycling. Utilities will vary based on the location, as well as the size of the home, but can be several hundred dollars per month. Brokers will advise clients that taking steps tosave energy on heating and cooling could lower monthly bills.

Remember to factor the cost of renovations, if needed, into the true cost of owning a home. Brokers will also tell clients to remember that strategic improvements can greatly increase both the livability and utility of the home, but also there sale value when and if your client sells it. The cost of home improvement projects varies widely based on what is being worked on but can total tens or hundreds of thousands of dollars.

Home maintenance entails the general up keep of things like the property’s systems, structures, and appliances. Up keep costs can be more predictable than some repairs, and one can expect 1-4 percent of the home’s value for annual maintenance.

Brokers know that the time and money required to own and maintain a home can be considerable. There are the monthly costs, which can involve mortgage, insurance, property taxes, and utilities, as well as annual maintenance. Plus, sooner or later, your client is likely going to have to replace an appliance, repair a roof, or otherwise update the home. And yet for millions of owners the benefits of owning their own place outweigh the costs. But it is important to know what to expect, and Orion’s brokers are in an ideal place to advise them.

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