First-time Buyer? Important Tips for Preparing Your Budget!
Aside from calculating your monthly mortgage payment, there are many other expenses you need to consider when planning the purchase of your first home. Have you sat down and mapped out the potential homeowner expenses you may encounter? It’s common for first-time homebuyers to overlook expenses they need to put into account when planning their budget. Identifying these things now can prevent them from sneaking up on you later!
First, it is important to consider the higher utility costs a house demands. The housing manager for the American Financial Solutions, Kelli Roland, advises that prospective homeowners call the local utility company and ask for the average cost of a bill is in the area in which they are buying; she says it’s easy to get surprised by the water and electric bills after buying a home.
Roland also points out other surprises one may encounter and can easily avoid, including moving costs and the monthly homeowners-association fees. Moving costs may include moving services (or the cost of renting a truck and the friends you may have to bribe), connection fees for phone power and internet, any renovations or decorating that will be needed right away, and potential legal expenses. It is also important to consider the upfront cost of a home inspection, which can vary depending on your location, along with closing costs which include appraisal, loan, title, and lender fees.
Also, credit counselors suggest saving 1% of your home’s value annually in order to compensate for basic maintenance fees, according to an article from MSN Real Estate. Whether it’s maintenance fees or small upgrades or replacements, like curtains, a lawn mower, or garage shelving, it’s important to anticipate these expenses in order to create a successful budget.
Do not get discouraged! Budgeting takes years of practice and dedication, and even the most successful savers cannot predict every future expense a home purchase might incur. A good technique is to try and gauge the success of your budget before it’s too late. Roland also suggests practicing mortgage payments by transferring the difference between your current rent payment and what you are expecting to pay as a mortgage payment into your savings account each month. This way, necessary life-style adjustments can be more accurately anticipated before you may the big decision. As a general rule of thumb, Fannie Mae suggests that buyers spend no more than 28% of their gross income on a mortgage payment and no more than 32% on total housing costs.
As always, it is in your best interest to meet with a qualified mortgage consultant to assess your situation before you begin searching for your first home. A lender will be able to help you put together a budgeting plan for purchase, make recommendations to build credit, and provide you with helpful tips and resources for new and prospective homeowners. With the proper planning in place, you will be on your way to homeownership in no time!