Especially if you are a first time home buyer, it is very easy to overlook the myriad costs of truly owning the house because of the excitement of owning your own home is so awesome.
These unexpected (ignored) expenses might be the determining factor between being comfortable in your new home and being house poor, accumulating credit card debt, or even God forbid, being foreclosured upon. You will not just have the mortgage to pay, but many other expenses like decorating, repairs, improvements, taxes and utilities. The list doesn't seem to ever end. My thirty years of experience as a Realtor in Louisville has taught me to plan for the worst and if that means buying less than you can afford, so be it.
I am NOT saying that owning a home is too expensive, or not worth it, it's the best feeling in the world. What I know is that when comparing two different houses in Louisville, at two different price points, take into account all the other expenses you will incur. A buyer's agent or any realtor in the area can help you. A smart Realtor who understands risks should steer you to the house that has a lower risk.
When purchasing real estate or even when doing a property search, make sure you have set aside funds for unanticipated expenses like a roof leak or a new water heater or even an entire heating and cooling system. Although you will have homeowner's insurance (another expense) coverage, it isn't something that you can totally depend on because there are huge gaps in the coverage and you will never be totally sure you are covered until the problem occurs.
Homeowners insurance also doesn't cover floods, anywhere. Flood insurance covers floods and water damage. So in the event that a drain gets clogged and water backs up and floods the house, or the seal on the toilet gives way when you are on vacation, you'll need to spend your own money to fix it. It's important for you to also become conscious of coverage limits of the insurance plan and deductibles, which in many cases will prevent you from submitting a small claim and trust me, those small claims will add up.
Also,before you sign on the dotted line on homeowners insurance, shop around a little and choose a reputable company and a fairly high deductible (750-$1,000). Studies show that a mid level deductible is the most cost effective approach.
Other unexpected expenses which WILL arise are appliance repairs, car repairs, water in the basement, medical expenses, life expenses like a vacation, and possible tree damage from Kentucky storms. You have to have about $5,000 to $10,000 dollars minimum in your liquid savings which you are able to convert into cash effortlessly anytime.
Taxes are also part of the unexpected expenses you'll have when purchasing a house in Louisville. As a homeowner, you'll be required to pay property taxes. These taxes are usually part of the monthly payment that you will are supposed to pay every month but there are times when you can pay them at the end of the year. Remember that your taxes for the home can rise even if you are on a fixed rate mortgage. This will increase your housing costs every month so anticipate the worst, but hope for the best.
Don't forget moving costs when you are doing a property search, which can be between $2,000 and $5,000 for a local move, and around $10,000 to move to another state. As mentioned before, utility bills like the electricity, water and gas, phones, internet and garbage will hit every month. Try to obtain a heating and cooling bill from LG&E before buying the house. Kentucky has very hot summers and long cold winters. These bills can have huge spikes in December and August.