BUYING A HOUSE

Calculating All Costs

February 2014

Cody Moldenhauer
ENGR 360
Contents
Introduction .................................................................................................................................................. 1
Cost Breakdown ............................................................................................................................................ 2
Costs.......................................................................................................................................................... 2
Amortization Schedule ............................................................................................................................. 3
Conclusion..................................................................................................................................................... 3
References .................................................................................................................................................... 4



1
Introduction

Houses around the world are often advertised as being a certain price. For example, a
house may be listed as being only $290,000. While a house may look nice for this price, it does
not include all of the fees associated with buying the house. When buying a house we have to
consider closing costs, insurance, interest amounts, taxes, and other fees. So while $290,000
seems like a great price, it often does not represent the true price of purchasing a home. In
order to find out all of the costs, we must first find an example home.
In order to make things simple I found a home for a listed price of $289,900. The house
is located at 829 Courtney St. Moscow, ID. It includes a pool, 4 bedrooms, 4 bathrooms, a 2 car
garage, and is 3,392 sq ft. It was built in 1977, so it should have lowed maintenance costs than
older homes in the Moscow, Idaho area. It is also relatively close to schools with a decent
rating. The distance to schools provides families with having a shorter commute to get kids to
school on time. Below are some pictures of the house showing the face, kitchen, living area,
and a bedroom.




2
Cost Breakdown
Costs

In order to calculate the cost of a home, we must first consider how the home will be bought.
For this example it will be paid for by paying 20% of the price for the down payment. Then the rest of
the cost will be paid for by taking out a loan. The loan amount will be $231,920. Next we have to
consider closing costs. This cost is found to be roughly 3% of the total price of the home. That means
that the closing cost is $8,697. According to the real estate site, the estimated interest rate for a 30 year
fixed loan will be 4.360%. The site also states that the estimates property tax per month will be $340
and Homeowners insurance will be $33 per month. This leads to a monthly payment of $1,530.
However, this does not include the cost of maintenance, or other fees associated with living in the
home. The estimated cost of maintenance, according to Wells Fargo, is 1-2% of the cost of the home per
year. However, because this home was made in 1977, the maintenance costs should be fairly low. Due
to the age of the home, the cost of maintenance per year should be just over 1% per year or around
$2,899. All of the costs and calculations are located below in Table 1.


Table 1. Housing Cost Information
Item Calculations Amount
Home Price Given $289,900
Minimum Down Payment Given $28,990
Down Payment Amount (289900)(.20)= $57,980
Loan Amount 289900-57980= $231,920
Closing Costs (289900)(.03)= $8,697
Loan Interest Rate Given 4.360%
Length of Loan Term Given 30 years
Property Taxes Given $340/month
Homeowners Insurance Given $33/month
Private Mortgage Insurance (Down Payment = 20%) ---
Routine Repair and Maintenance (289900)(.01)= $2,899/year


3
Amortization Schedule

An amortization schedule is a way of showing how much we will be paying for the house over a
period of time. It shows the principle, interest, cumulative principle, cumulative interest, and remaining
balance. In order to not consume a ton of space only the first five and last five months of the schedule
are shown below in tables 2 and 3.
Period
Beginning
Balance Payment Principle Interest
Cumulative
Principle
Cumulative
Interest
Ending
Balance
2-Feb-14 $231,920.00 $1,155.89 $313.25 842.643


$231,606.75
2-Mar-14 $231,606.75 $1,155.89 $314.39 841.505 $314.39 $314.39 $231,292.37
2-Apr-14 $231,292.37 $1,155.89 $315.53 840.362 $629.91 $944.30 $230,976.84
2-May-14 $230,976.84 $1,155.89 $316.67 839.216 $946.59 $1,890.89 $230,660.16
2-Jun-14 $230,660.16 $1,155.89 $317.82 838.065 $1,264.41 $3,155.30 $230,342.34
Table 3. Amortization Schedule (first 5 months)

Table 4. Amortization Schedule (last 5 months)
Conclusion

From the project, we can see that the cost of buying a $290,000 house is much more than just
$290,000. We must consider how much maintenance costs, interest on payments, closing costs, taxes,
and insurance. Aside from all of these payments, we must also pay for furnishings, living costs, and
utilities. All of the payments lead up to much more than just the $290,000 list price. This gives people
something to think about before buying a house that may seem like a good deal. A way to save money
may be to just save up the money to buy the house without taking out a loan, or to rent a house for a
period of time until you can afford to pay for a house. Overall the project proves that buying a house is
much more expensive that the low list price that people usually see.

2-Oct-43 $4,582.89 $1,155.89 $1,139.24 16.6512 $228,163.10 $32,221,340.29 $3,443.65
2-Nov-43 $3,443.65 $1,155.89 $1,143.38 12.5119 $229,306.48 $32,450,646.77 $2,300.27
2-Dec-43 $2,300.27 $1,155.89 $1,147.53 8.35764 $230,454.02 $32,681,100.78 $1,152.74
2-Jan-44 $1,152.74 $1,155.89 $1,151.70 4.18828 $231,605.72 $32,912,706.50 $1.03
2-Feb-44 $1.03 $1,155.89 $1,155.89 0.00376 $232,761.60 $33,145,468.10 ($1,154.85)

4
References
"829 Courtney St Moscow, ID 83843." REALTOR.com. N.p., n.d. Web. 03 Feb. 2014.
N.p., n.d. Web.