When Bankrate editor Inddavis recently bought her first home, she knew that escrow payments would change, but the degree of that was not clear.
“My agents and mortgage companies framing it as an increase of several hundred dollars a year when reality is much higher,” Davis says. “I was able to understand how to pay a new monthly mortgage, but I was worried about how much the price had changed.”
For many home buyers, the surprise at their mortgage and homeownership comes after they finish the transaction – some are good, others are not very good. To gain more insight, we voted for the Bankrate team homeowners to find out what they wanted to know before getting a mortgage and owning a home. Here’s what they said and their advice to hopeful home buyers.
1. Escrow payments may change
The most common homeowner surprise from our team was about how mortgage escrow changes. Most borrowers set up escrow accounts to cover their annual property taxes and insurance, and contribute as part of their monthly mortgage payments. As Davis has experienced, these parts of your mortgage payments can change each year, especially after you buy your home.
“If you have advice, when you’re shopping at home, you say you can go under your budget and stay on your actual budget for the long term,” Davis says.
Additionally, depending on the way the state evaluates property tax, the tax amount could rise significantly after the property is sold. This is known as property tax compensation.
Bankrate senior writer Lauren Nowacki and her husband went through this. Before they bought the house, they looked up the property tax of the previous owner and expected to pay a similar amount.
“When the property was sold, they didn’t think they could revalue it. The taxes went from about $1,200 to over $3,000 a year,” Nowacki said. “And we had a shortfall of about $2,000 when the mortgage company achieved its performance, as our mortgage company is based in escrow based on the taxes paid by the previous owner. Escrow analysis. Not only did they have to pay that shortfall, but their monthly mortgage payments increased by over $100 as their escrow accounts next year were based on new property taxes. ”
When the property was sold, I didn’t know they could revalue it. Taxes went from about $1,200 to over $3,000 per year.
-Lauren Nowacki
Bankrate Senior Writer
There could be a shortage of escrows and bolster your budget, but flipsides could also occur.
“My husband and I actually got a refund from our escrow account months ago, because we overpaid it last year,” says Bankrate editor Alice Holbrook.
2. Homeownership costs are high and can rise
Once you buy a house, you’re on the hook to keep it up. It means doing the job and covering additional fees, Maintenance Cost. According to Bankrate’s 2024, when these homeowners spend insurance, property taxes and utilities, the annual tab for owning and maintaining a typical single-family home is over $18,000. The hidden costs of homeownership research.
For many homeowners, especially condo owners, homeowners also include expensive homeowners association (HOA) fees, which can increase regularly.
“Our first home was a condo and we owned the home every year, so our HOA fees increased,” says Bankrate Editorial Director Amy Sims. “By the time I sold my home five years later, the fees had risen by $75 a month and were about to increase again.”
Sims encourages future home buyers to consider the possibility that annual HOA fees may rise into their budget. This way, if the fees don’t increase or slightly increase, the homeowner can use that money elsewhere.
3. Home inspections may not catch everything
For most people, home inspections are part of the home buying process. However, not all tests are perfect. Sometimes the problem is either completely shiny or completely hidden.
For example, the house I bought in 2017 had a bathtub faucet with a small IV drip that was not noticed by us and our inspectors. However, after moving, this IV drip became a stream. When the plumber inspected the pipe, he found a broken rubber washer that had deteriorated over time and could not be replaced by the previous owner. We paid the plumber $100 for a service call to find and fix the issue within 10 minutes. Still, it was an unexpected problem and expense after the house inspection.
Another surprise? After purchasing, I also discovered an unpaid bill from the previous owner. To transfer the utility to our name, we had to take them away to pay the bill.
4. Mortgage payments may appear more affordable if income rises
When it comes to surprises about having a mortgage and owning a home, it’s not all about fate and darkness. The costs can go up, but for those with fixed-rate mortgage mortgages, the principal and interest portions of the mortgage payments will remain the same. If your income has grown over the years of your loan period, your monthly payments can be a smaller part of your finances.
“In fixed-rate mortgages, the illusion that housing costs are shrinking because principal and interest are not rising to inflation,” says Jeff Ostrowski, a writer and housing market analyst at Bankrates. “What seemed like a difficult amount when it was easy to afford five years or so later.”
My wife and I have experienced this too. After buying my first house together in 2017, I saw monthly payments on several reservations. We knew we had income to cover the bill, but I also knew that the money would be tighter than before. But by the time I sold my house five years later, that monthly mortgage payment felt as reasonable as my old rent.
5. Your mortgage can be sold
Speaking of sales, that was what another common surprise bank rate mortgage owner experienced. Their mortgage was sold. While the mortgage is being sold Secondary mortgage market Often, when borrowers say that their mortgage has been sold, they usually mean that their lender has sold their mortgage service rights.
What does this mean? This means that the new company will oversee your mortgage repayments and spending from your escrow account. When this happens, nothing changes except sending monthly mortgage payments.
Homeownership is full of surprises
Beyond the stressful but exciting ride of buying a home, there is an unexpected set of turns to having a mortgage and owning a home. When challenging homeownership, leave space on your budget to cover potential rising property taxes or unexpected repairs. But don’t forget that many fun surprises can also be brought to your path, including a potential reduction in housing costs as a percentage of your income.
