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Budgeting Your Way into Your First Home
Buying a new house can be a long, costly process, and preparing as much as possible will make it easier. You can avoid unexpected expenses and find a place to live that's affordable and comfortable for your family. Here are some tips from our real estate agents to help you budget your way into your first home.
Tips for Making Home-Buying Dreams a Reality
Save for a Down Payment
You should make your down payment as large as possible to save on mortgage interest. If you put at least 20 percent down, you can avoid paying for mortgage insurance. This type of insurance protects the lender and guarantees payment for people who choose lower down payments. According to Investopedia, it usually costs about 1 percent of the mortgage balance per year. That would be $1,500 for a $150,000 loan, more than $100 per month. Recent tax cuts eliminated a deduction for mortgage insurance and increased costs further.
Even if saving 20 percent isn't possible for your family, you can reduce costs by making your down payment as large as possible. Also, a larger down payment will give your home immediate equity and help you increase your credit score. That way, you can easily qualify for an additional loan for a new car or fresh decor for your home.
Prepare for Buying Expenses
Closing costs usually include fees for:
- An appraisal
- A survey to verify property lines
- A wire transfer to send funds to the seller
- Loan underwriting
- Document preparation
- Credit reporting
- Recording fees for changing property records
- Title insurance to protect you if the seller doesn't have the full deed to the property
Our agents can help you negotiate with the seller to reduce these costs as much as possible. We can also assist you with persuading sellers to replace old appliances and take care of repairs before you move in. That way, you can save time and money.
Decide How Much House You Can Afford
The cost of the mortgage isn't the only thing you need to consider. Other recurring expenses include homeowners insurance, maintenance, and landscaping. The rent for many apartments includes water, sewer, and trash pickup. In most cases, you'll need to pay these fees if you own your own home. Some homeowners' associations (HOAs) include some of these services in their fees, but you may end up paying more than you would in a house without an HOA. You'll also need to pay for property taxes and larger utility bills.
Budgeting for your first home can help you and your family make buying a house and moving less stressful. It can also prevent unexpected expenses. Contact us at Wagner Realty for help with creating a budget for your first home. We can also assist you in finding a place in your price range that meets your needs and help navigate the closing process.