Covering the Costs of the First Year of Homeownership

Homebuying is the American dream, however many walk into it without knowing the full weight of the financial decision they are about to make. The first year of homeownership alone is burdensome to many new homeowners as they face the additional costs of their purchase. Where can homebuyers look to shop to be able to afford these costs with minimal debt?

Point2’s latest report took a look at the 100 largest markets to determine the costs associated with the first year of homeownership, focusing on two types of expenses: Upfront costs (such as down payment and closing costs) and annual recurring costs (such as mortgage payments, insurance and taxes).

The report then analyzed the number of years it would take to cover the full cost of the first year of homeownership (by saving for that amount of time, or by paying off costs progressively through the years via loans, etc).

Here are the top 5 cities with the fewest years required to cover the cost of the first year of homeownership:

Detroit, Michigan at 4.3 years
Total first year costs: $25,110
Average upfront costs: $17,583
Average recurring costs: $7,527
Median income: $28,986

Toledo, Ohio at 6.5 years
Total first year costs: $38,008
Average upfront costs: $26,862
Average recurring costs: $11,146
Median income: $29,387

Cleveland, Ohio at 6.7 years
Total first year costs: $38,569
Average upfront costs: $26,852
Average recurring costs: $11,717
Media income: $28,743

Fort Wayne, Indiana at 7.6 years
Total first year costs: $59,779
Average upfront costs: $43,554
Average recurring costs: $16,225
Median income: $39,474

Indianapolis, Indiana at 8.3
Total first year costs: $73,148
Average upfront costs: $53,066
Average recurring costs: $20,082
Median income: $44,221

Major takeaway:

“For most Americans, the homebuying journey is daunting in and of itself—without even thinking about the expenses that follow once they check that milestone off their list,” said Alexandra Ciuntu, a creative writer for Point2 and author of the report. “And, with the national down payment averaging $85,100, homeownership-related costs risk breaking the bank even before considering recurring mortgage payments, homeowners’ insurance, and property taxes. Still, the cost of that first year as an owner is a beast of its own that cannot be ignored—particularly in the big city.”

For the full report, click here.