Despite the current state of the economy, homeownership remains the cornerstone of the American dream. According to a 2022 Bankrate survey, 74% of respondents regard homeownership as the highest measure of prosperity. However, two-thirds say the costs associated with buying and owning a home prevent them from taking the leap.
It's true — buying a house is a substantial financial undertaking. The costs are usually most surprising to first-time buyers. Nevertheless, the dream of owning a home is attainable — as long as you're willing to make a few sacrifices.
The Real Costs of Home Ownership
Amid skyrocketing rents and lower mortgage rates, it's little wonder that prospective buyers are considering buying a house. The asking price for a unit rose 23% in the second quarter of 2022 compared to the same timeframe in 2019.
If you've budgeted for a home — the current median sale price is $442,100 for a single-family house — and determined you can afford to buy, congratulations. Just keep in mind that there are expenses involved than the outright purchase, such as the following:
- Down payment and closing costs
- Moving fees, usually between $918 and $2,535 or higher
- Mortgage payments
- Property taxes — the average is $2,471 for U.S. households
- Homeowners insurance — about $1,899 per year
- Utilities, including electricity, water, heating and cooling
- Home maintenance, such as cleaning, landscaping and regular inspections
- Potential HOA fees
Additionally, your home could require critical repairs to the roof, HVAC, insulation, appliances, plumbing or unexpected damage — these costs add up significantly.
What Are You Willing to Sacrifice?
Even with a decent salary, you'll want to watch your cash flow for hidden savings toward home expenses. The more you're willing to cut back on, the better.
For example, the average American spends $2,375 on dining and takeout annually. Although it's OK to enjoy eating at a restaurant occasionally, you'll want to make those visits less frequent. Cooking at home and opting for leftovers is a wiser choice when trying to save money.
You can also eliminate your cable and stick with one or two subscription services. A cable TV plan could cost you between $50 and $150 monthly, depending on the package. Subscriptions to Netflix or Hulu are much more cost-effective and can free up cash for monthly utility or mortgage payments.
At the same time, you'll want to examine how many subscriptions you hold and cancel any you rarely or no longer use. For instance, there's no point in keeping Audible if you prefer reading books yourself.
Other sacrifices you might need to make include the following:
- Cutting back on shopping for clothing, accessories and decor
- Put off big-ticket purchases
- Cancel upcoming vacations
- Reschedule a medical procedure or expensive test
- Put off getting a degree
- Divert retirement savings toward household costs
Buying a house doesn't mean you'll never get to go on your dream trip to Italy. However, you'll find that socking away money wherever you find it will prove most helpful in the time being.
Things You Can Do to Boost Your Savings
Some sacrifices might look different than you'd expect. Rather than eliminate things from your lifestyle, you may need to make other adjustments, such as finding a second income source.
Working a part-time job in the evenings or on weekends can boost your savings to afford your home purchase. It is also the way to get back some of the financial sacrifices you made before, like that medical procedure or retirement savings.
Freelancing might be another option. According to Zippia, 9% of Americans worked gig jobs in 2021 — a market worth $350 billion. There's money to be made in taking on writing, editing or other contracted work.
Additionally, the rental market is tight. Depending on your home layout, you could rent a room to a single occupant. This may be easier if you reside in a college town or live somewhere with young professionals looking for a place to live. If you live alone or don't have a family, this may be practical — rent payments could then go toward paying off your house.
Can You Afford to Buy a House?
Deciding to buy a house is not something you should take for granted. Although homeownership has many perks, you must afford the financial burden. It's common to make a few sacrifices to cover unexpected expenses. Likewise, finding ways to boost your income can make a difference.