There’s more to a home's cost than just the mortgage (© Whisson/Jordan/Corbis)

On his road to homeownership, Scott Leibfried has learned one thing: Expect the unexpected.

He and his wife had an offer accepted on a home, only to find out later that foreclosure proceedings were about to begin on it. That’s after they considered another home that was aesthetically pleasing but had major issues that came to light upon closer inspection.

In the meantime, they’re trying to estimate the money they will need for closing costs and any future expenses, hoping that they won’t eat too much into their financial cushion. (Bing: What are closing costs?)

“There are always going to be things that come up,” Leibfried said.

That statement could describe homeownership in general.

What's your home worth?

Allan Glass, a Los Angeles-based real-estate agent who works with the couple, says that “the biggest mistake buyers make is underestimating the costs” of buying a house and maintaining it over time.

Homeowners should have 1% of the purchase price of their home in savings for improvements and surprise expenses, he said. “That is the absolute minimum. It’s better to have 2% to 3% socked away somewhere.”

The cushion often isn’t easy for first-time homebuyers to have — especially after they’ve scrimped and saved for their down payment. And many first-time buyers are in the market now because of affordable prices and low interest rates.

“Some people walk away from closing with a nickel and a stick of gum, and that’s probably not going to be a good idea,” says Dale Robyn Siegel, president of Circle Mortgage Group, in Harrison, N.Y. She recommends having at least six months of mortgage payments in the bank after closing on a house, “especially now, with such an iffy job market.”

Article continues below

 
   

A five-year budget
To get a better handle on where the house stands, buyers should attend a home inspection and ask questions, says Bill Richardson, a home inspector in New Mexico and president of the American Society of Home Inspectors. That way, they can get tips and recommendations from the inspector as he or she is working. They should keep the inspection report handy for reference.

For existing homes, an inspector will estimate the age of major components, giving the homebuyer a sense of when they will need replacing. A furnace, for example, often lasts between 12 and 15 years; a water heater from 10 to 12 years, he says.

A list of approximate life expectancies of home components — as well as cost estimates — can be found at LivingWithMyHome.com, a website sponsored by home-inspection company Pillar to Post. Click on the “Repair & Remodel Estimates” tab.

Slide show:  Home-inspection nightmares

Once you know what you’re dealing with — and perhaps what the sellers will repair or pay for before the sale is final -- look five years out and make a list of big-ticket home issues that you’ll need to address, says Kelly Rogers, director of education for the Consumer Credit Counseling Service of Orange County, based in Santa Ana, Calif. Make a time line for those expenses.

And don’t count on borrowing money needed for repairs. “The banks have really tightened up, so it’s harder and harder to get a home-equity line of credit,” Richardson said. “If you don’t budget for repairs, you will never get the repairs done when you need it.”

When small problems pop up, it’s important to address them before they become large-scale projects. Consider the tile in the bathroom: As soon as there’s deterioration or cracking, address it, Richardson said.

“If the toilet is loose to the floor ... it doesn’t seem like a big deal, but it can leak and rot the floor,” he said. “What could be a $15 repair could (end up being) a $700 repair or more.”

Richardson suggests planning for a $500 to $1,000 annual general maintenance budget for most starter homes, which would cover everything from painting a room to caulking the bathtub.

“Buying a home is one of the largest investments you’re going to make,” he said. “If it’s done wisely and with lots of thought, it can be a huge asset. If it’s not well thought out, it can become a huge burden to you.”

Home affordability calculator

Monthly surprises
Estimating monthly expenses can often trip up new homebuyers as well.

As renters, people are accustomed to paying rent and some utilities, such as phone, Internet service and cable.

Homeowners, however, also face other utility costs, such as water, sewer and trash collection. Then there are property taxes, homeowners insurance and perhaps homeowners association dues.

There also can be expenses unique to your location. In Los Angeles, for example, water restrictions are such that if you go over a certain cap of usage, you face a penalty, Glass said.

Remember, you also can have miscellaneous expenses such as snow removal and lawn service, if you don’t plan on doing them yourself, Siegel said.