Buying a Home

Buying your first home, moving to a larger house to accommodate your growing family, or finding the perfect vacation home - no matter what your future holds home ownership is one of the most important financial commitments you'll make. Once you've found the perfect place and all that goes into it, you'll want to make sure your life insurance coverage is in order as well. Without sufficient insurance protection to cover the unpaid balance on your mortgage and other debts and expenses, your family's home could be at risk in the event of your death. Planning the right amount of insurance protection is simple, it starts with a better understanding of the costs associated with home ownership. Here are some facts to consider:

How much should I plan to spend?
How much can I afford?
How much should I budget for home maintenance?

How much should I plan to spend?
According to statistics by the United States Census Bureau, the median sales price of new single family homes sold in 2009 was $216,700. The average sales price for the same period was $270,900. Regionally, the average sales price for a new home ranged from $241,200 in the South to $411,300 in the Northeast.

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How much can I afford?
Most mortgage lenders agree that your expected housing costs, which include the principal and interest payments on your mortgage loan, plus taxes and homeowner's insurance - should not exceed 28% of your income. The second measurement of housing affordability is your debt-to-income ratio. Ideally, your total monthly debt - including your expected housing costs plus credit card bills and loan payments - shouldn't exceed 38% of your monthly gross income, and preferably not more than 36%.

By learning the size of the loan you qualify for, you can better assess the maximum price of the homes you can afford. Keep in mind that your monthly mortgage payment will be determined by the amount of your down payment, and the terms of your mortgage loan - including the interest rate, fees and expenses financed with the loan and the length of loan (15 years, 30 years, etc.). Because your individual situation may vary, consult with your financial advisor or mortgage loan expert to determine how much you can afford.

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How much should I budget for home maintenance?
While there are many benefits and tax advantages to owning a home, the costs of maintenance can add up. In preparing your financial plan it's important to keep these in mind. Here are average costs for just some of the maintenance items you may encounter in the years to come:

• Replace windows - $400 to $600 each.
• Exterior painting - $3,500 to $7,000.
• Interior painting - $500 to $800 per room
• Install new forced-air furnace - $2,500 to $5,000.
• Add central air conditioning system - $2,500 to $3,500.
• Major bathroom remodel - $6,000 to $12,000.
• Major kitchen remodel - $15,000 to $60,000.
• Wooden fencing $25 to $35 per linear feet.
• To replace roofing (one "square is" 10' x 10').
  - Composition shingles - $200 to $300 per square.
  - Wood shingles - $400 to $500 per square.
  - Wood shakes - $400 to $600 per square.
• Build room addition - $150 to $350 per square foot.
• Replace tile shower - $2,200 to $3,200.
• Replace water heater - $600 to $1,200.
• Build detached garage - $100 to $150 per square foot.
• Wooden deck - $25 to $50 per square foot.

(Cost estimates provided by Star Inspection Group for a typical small-to-medium sized house in California. For more information, see www.stargroup.com.)

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