5 Budgeting Tips for First Time Home Buyers

Homebuyers

Don’t Miscalculate While Buying Your First Home!

Post by Claire Atkinson

Buying a home for the first time can be as nerve wracking as it can be exciting. For many people, it can be hard to tell how much money will be needed for all the expenses that can go with purchasing a home. First-time home buyers may not be fully aware of all the extra expenses that come with purchasing a house, hence, they may have problems budgeting properly. Being prepared and fully aware is important for financial security when buying a home.

Most people realize by now they can use an online mortgage calculator to figure how much they can afford in monthly payments for a house. However, there are several things as well as mortgage payments that need to be considered when budgeting money before and after a home purchase.

*Upfront costs – It will cost around $300 to $400 to have the home inspected by a professional prior to the purchase. While this may not be mandatory, it will help point out and avoid any potential major problems with the house.

*Closing costs – Purchasing a home is a complicated process and requires a great deal of paperwork that doesn’t come cheap. There are fees to be paid to the lender, lawyers and appraiser, as well as costs for the loan and title.

* The average closing costs has increased since last year in most states. According to bankrate.com, a home buyer applying for a $200,000 mortgage will pay on average $2,400 in closing costs. It’s important that buyers include these substantial costs in their budget calculations!

*Monthly bills – It will be important to have an idea on how much the monthly utility bills will run for the house that will be purchased. The real estate agent will usually be able to provide some idea how much the heating, electric and water bills have been on average. If not, try to find out from the current owners if possible.

*Maintenance – As any homeowner will attest, it is impossible to plan for everything. Whether it’s new windows, a roof replacement or a new major appliance, it’s only a matter of time before a costly repair will need to be made. Some experts suggest setting aside one percent of the home’s value each year to help cover these unexpected costs. It might even be a good idea to set up a separate savings account for this fund and to make monthly deposits, rather than trying to set aside one lump sum.

*Practice – Some experts recommend potential first-time home buyers practice making mortgage payments before they have to do the real thing. After the potential mortgage payment has been figured, take a few months and move that amount of money into a savings account and don’t touch it. This will give a proper feel for whether that amount of money can be spent each month on house payments. In addition, track daily expenses and revenue in a notebook so as to find out what sort of cash flow is happening.  If you love technology, find an online budgeting app that will hep you plan and keep track of all your expenses. 

Purchasing a home for the first time can be an exciting, yet scary, experience. Knowing what expenses will need to be covered, and how to budget for them, will allow the new home owner to rest easier at night and enjoy their new investment.

 

This is guest post written by Claire Atkinson on behalf of Kanetix, a mortgage comparison website. Kanetix can help you compare Kitchener rates and also provides more tips for first time buyers.