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Ask Carmen: Home-buying checklist

A real estate sign hangs on a fence in front of a home in the Wicker Park neighborhood on October 28, 2013 in Chicago, Illinois. For the fourth straight month the index of pending home sales has fallen, reaching the lowest level in more than three years.

There seems to finally be bright spots in the housing market. In many areas of the U.S., home values are rising -- but so are interest rates. So, we've been getting a lot of questions on when you know you're ready to take that plunge and buy a home for yourself. Is now the time? 

Marketplace Money listener Jennifer lives in Portland, Ore., and is wondering if it's time for her to buy. She lives there, in a rented home, with her husband. Jenniver notes that rents in the area are nearly the same as monthly mortgage payments, and they can afford the monthly payment. Jennifer has $10k in her Roth IRA which could potentially help with the 20 percent down payment.

Even though it can be tempting to own your own home, it can also lead to a slew of headache down the road. Carmen suggested this quick checklist to Jennifer to make sure she's taking the right things into account and making the right decision:

1. Look up property taxes in advance

Though rent and mortgage payments can look similar, property taxes for owning your own home can spiral home-buying costs out of control. 

2. Estimate home-insurance costs

Home-insurance can also quickly add costs to owning your own home. According to the Federal Reserve Bureau, the average an annual premium is between $300 and $1,000.

3. Estimate maintenance costs

Yep, you'll be on the hook now for maintenance costs if the roof leaks or the dishwasher breaks. And when you buy a new home you'll probably want to change some applicances and perhaps take part in remodeling as well. Carmen suggests budgeting an extra couple thousand for costs.

4. Compare that extra cost to renting

How much do you need on hand to cover the down payment, housing expenses for 6 months and living expenses? Break up that extra total cost into monthly payments and see if you could be able to afford that on top of renting. How much more money will you need a month to own your own home? Make sure you're still able to save for retirement, too, since you won't be able to borrow money in the future to cover that. 

Owning your own home isn't the time to be cheap, but it's important to have a tangible number goal in mind so you know how much to save in advance. If you can answer those questions confidently, you're probably ready to own your own home!


For future coverage, we're wondering about emergency savings, tell us about your safety net:

About the author

Carmen Wong Ulrich is the former host of Marketplace Money, APM’s weekend personal finance program.

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