The cost of home ownership is more than just your mortgage payment. Take note of these seven hidden costs and be prepared for the actual payments.

When you are looking for a mortgage, there is a huge difference between what you qualify for and what you can afford. Unfortunately, many lenders and online calculators use the terms "afford" and "qualify for" interchangeably. They are not the same thing!

"If the bank tells you that you can afford a mortgage of $1500 a month," says Gil Bricault, a broker associate at The Family Team at Coldwell Banker Cahoone in Westerly, Rhode Island, "that may be technically true. But if that's really the maximum that you can pay, there's really no slack, no room for error-especially if you have a bad month or if you or your partner loses your job."

Some say that you should add 40% to your base mortgage payment to get the amount that you will eventually pay. Just like with online calculators, it's a good figure to start with. In the end, though, to figure out the amount that you will actually end up paying on a monthly basis, you'll need to do a much more nuanced calculation. Sadly, there is no easy, cookie cutter method for figuring this out.

Read on for seven costs that you should factor into your final equation when budgeting for your monthly expenses:

1) Emergency Fund

While an emergency fund isn't a monthly payment, per se, it is something that you should be contributing to regularly. "The first advice that I give to buyers," says Gil Bricault," is to not cut themselves too short when they are budgeting a down payment. They should make sure that they have at least two to four thousand dollars in some sort of emergency fund."

Again, there's no cookie cutter formula for how much you should have on hand in your emergency fund. Keep in mind, though, that if you live in a more expensive house, everything is going to cost more to fix.

Also, when thinking about how much to save, consider the age of your house. "If you buy a 35-year-old home with a 35-year-old heating system with a 20-year-old roof, there's a greater probability that something will go wrong than if it was a brand new home," says Bricault. "The older the house, the more money that I would have available."

2) Maintenance

The expense of monthly house maintenance is something that pays off long term. Things that are small problems today become big problems tomorrow-then you'll really need to tap into that emergency fund.

Things that come under the topic of regular maintenance include lawn, landscaping, pest control, and repairs (plumbing, broken faucets, windows, etc.). This cost is going to vary month to month, but $100 is generally a good average amount to set aside.

In terms of preventative maintenance, you should also have your heating/ac system looked at twice a year to make sure that it is working properly. The cost of the inspections will take care of problems before they get bigger and will save you money on monthly cooling and heating costs with a more efficient system.

Some other things to think about: if you don't have public water, you should be testing your well every year for bacteria; if you have a private septic system, you should plan to empty it every couple of years.

3) Utilities

Utilities are a monthly expense that is at least a little bit more predictable. However, if you've been a renter up till now, you may end up paying for more than you are used to. Plan to pay for electricity, heating, cooling, water, and sewer.

To get an estimate, ask local utility companies to provide you with the monthly average utility bills for the seller. Keep in mind that these figures may not be completely representative. "You need to think in terms of who has been living in the house," advises Bricault. "If you've got three teenage girls and the previous tenants were a middle-aged couple who was out of the house all of the time, your water bill might be twice as much."

Overall, cover yourself by budgeting more for utilities than you think that they'll cost. "I think you'll always find that your heating cost runs a little higher than you thought," says Bricault. "Add 10-15% in your mind. If you think it's going to be $1000 a year on heating oil, it's probably going to be $1150."

4) Property Taxes

This is another more predictable monthly cost. However, don't just go on what is quoted on the house listing. That figure is often based on the old assessed value of the house. Call your county property assessor's office to get a more accurate estimate. Local tax rates vary, but your home is typically taxed on its assessed value, an amount that is equal to a fraction of its appraised value, which can change.

In this economy, you can expect regular increases in your taxes. "Taxes are going to go up. Real estate taxes, particularly," says Bricault. "I don't know of any communities out there that are not in trouble. At the end of the day, somebody has to write the check and it's always on the back of the homeowners. When you look at the rate of the growth in taxes, it's far above the rate of inflation. Just assume that there are no bargains in taxes and they're only going to go up.

5) Insurance

Homeowner's insurance protects you from fire and theft. Flood insurance is a whole different policy and you may be required to purchase it if you live in a flood-prone area.

Again, what the current homeowner has the house insured for may be irrelevant. "You should get a quote up front," says Bricault. "The bank is going to want the house insured to at least the mortgage value and we always recommend to our clients that they get it insured to the replacement cost. Get an actual quote or you could be in for a big surprise."

If you couldn't pay the full 20% of the value of the house for your down payment, you'll also need to purchase private mortgage insurance, which will add to your monthly charges. It's one reason among many to wait till you have that 20% before getting a mortgage.

6) Association Fees

If you are purchasing a home in a subdivision, a condominium, or even an apartment, you may have to pay association fees or maintenance fees to keep up the common areas and pay for shared expenses like lawn mowing, security, or a front-desk attendant. These fees vary, but can add up to more than $100 a month.

7) Home Improvements

Here's another cost that's hard to predict. Once you own your own home and can do pretty much whatever you want with it, you're going to get the urge to upgrade, replace, and paint things.

For this one, the costs are not just in cash, but also in your time. Home improvements take a lot of time and work and if you are a new homeowner, you will likely do a lot of them yourself. You have to consider how much you get paid and whether it is better to spend that time making more money or paying somebody to do the upgrades for you.

Thinking about the hidden costs of home ownership is not fun. It's necessary to budget for them, though, or you might end up unable to make your payments at some point down the road.

Buying a home is such an emotional decision," says Bricault. "It's kind of like falling in love, but at some point you have to become objective. None of these expenses are reasons not to buy a house. I still think that you're better off controlling your future by owning, but I think that you have to go into it with both eyes open."

Ultimately, your realtor and broker should help you to figure out these hidden expenses. "If you've got a good realtor and a good mortgage company," says Bricault, "they'll touch on all of these things." How do you know if you don't have a good realtor or mortgage company? "Simple. You'll know if they talk more about the house and not about you and your finances!"

Published on March 11, 2011