Your home is probably the most expensive and important investment you’ll ever make. It’s easy to get caught up in floor plans, wood finishes, and school systems while forgetting about the more mundane details of home buying.
However, preparing a budget and managing your finances are extremely important tasks for any future homeowner. Here are 4 major things to consider during this process.
4. The Expense of Purchasing a House
The biggest cost associated with buying a house is your down payment, but this is far from the only thing you have to worry about. You should also plan for the following:
- Property insurance
- Property taxes
- Title insurance
- Home inspection
- Home appraisal
- Prepaid mortgage insurance
- Title processing fees
- Loan origination fees
- Escrow fees
Make sure your budget has ample room for these costs and you understand what each mortgage term means, such as principal and interest, fixed rate, HOA, loan term and escrow. You also need to decide how much you plan to use for your down payment. Loans require a percentage, such as 3.5 percent down for FHA-insured loans, but putting more money down could significantly lower your interest rate.
Use a mortgage calculator to compare different scenarios such as putting more money down to lower your monthly payment and using different loans. Keep in mind that you’ll want extra money in your bank account for furniture, repairs, and any additional expenses. You wouldn’t believe how many times I’ve been to Lowes and Home Depot in the last month.
Also, you want to make sure that your family is covered in case you are unable to make your monthly payments. Companies like AAMI life insurance can help you figure out how to get the best cover for the whole family. That was one of my big worries when I was buying a house, you don’t want all your life savings to vanish and your family evicted because something happened to you.
3. Outfitting Your New Home
Think carefully about the home furnishings you already have and what you’ll need for your new home. If you’re moving out on your own for the first time or splitting your wares with a roommate, you might find yourself lacking basics like seating and cookware. Ask your friends and family where they shop for furniture and housewares and make sure you set a budget and stick to it.
Long-time apartment dwellers usually find that they need to invest in items like a lawnmower, rake, and hose. If appliances aren’t included in your home you’ll want to buy these right away. You might want to do some decorating as well, requiring purchases like paint, shelving, and new hardware.
2. Costs of Homeownership
Once you’re settled into your home, you’ll need to manage all the ongoing expenses of owning your own house and piece of land, however small. Some costs that new homeowners often forget include:
- Trash pick-up
- Homeowners association fees
- Appliance repair and maintenance
- Landscaping and lawn maintenance
- Homeowners insurance
- Pest control
You can’t eliminate these expenses entirely, but you can shop around for the best deal. If your budget is starting to look a little tight, consider DIY home repair jobs, energy-efficient home practices, and other ways to cut these costs as much as possible.
1. The Lifestyle You Want to Lead
It’s common for families to cut back drastically to save up for the initial expenses of purchasing a home, but you should stop and think about the lifestyle you want to enjoy long-term once you’re settled into your new home. Don’t buy a house with a mortgage payment you can barely afford if you can’t stand the idea of giving up Friday pizza nights or weekends out of town for the foreseeable future.
Instead, look for a home that leaves plenty of extra funds for the things you enjoy, so you can enjoy your dream life and your dream home together rather than barely squeezing by each month. That way, your quality of life won’t suffer just so you can live in your dream home.
Once you’ve moved in, make a list of the things that need to be done right away, such as closet shelves, paint, repairs, or purchasing kitchen items; this varies according to what’s most important to you as a new homeowner. I also recommend tracking your home expenses right away, so you can stay on budget while enjoying your time as a new homeowner.