Image

5:26 PM / Wednesday September 28, 2022

11 Aug 2017

Tips to prepare your budget before buying a home

  • Facebook
  • Twitter
August 11, 2017 Category: Color Of Money Posted by:

BPT

It’s virtually impossible to know what size home you can afford if you aren’t fully aware of how much money you are earning and how much you are spending each month.

Start with your income: How much do you bring home after taxes and retirement plan contributions?

Next, look at your expenses: What are your necessary expenses? How much are you paying each month toward your debt? What additional expenses do you have that wouldn’t be deemed “necessary?” How much money do you have left (if any)?

This will help you see how much breathing room is in your current budget, what expenses might be on the chopping block and the space you have for additional home and mortgage expenses when buying a home.

Consider the potential costs of being a homeowner

While rent payments are generally straightforward and predictable, the same can’t always be said for homeownership costs. Your situation can vary depending on a variety of factors, but here are a few things you might need to prepare your budget for.

Property taxes: The amount you pay will depend on the area in which you are purchasing a home. This amount can be subject to annual adjustment by the municipality or local taxing authority.

Homeowners insurance: Lenders will require you to provide proof of coverage before closing. The amount you pay will depend on your level of coverage, your property and the location. Insurance costs can increase from time to time.

Private mortgage insurance (PMI) or mortgage insurance premiums (MIP): If your down payment is less than 20 percent on a conventional mortgage, your lender will require you to carry private mortgage insurance. If you have an FHA loan, you’ll be required to pay mortgage insurance premiums throughout the life of the loan.

Home ownership assistance:  A company like Unison Home Ownership Investors can strengthen your down payment overnight and eliminate the need for private mortgage insurance (see their Unison HomeBuyer program). Using this method will typically save you between 15 and 20 percent per month on your mortgage payment, but you could owe a portion of the appreciation on the home when you sell.

Homeowners association fees: Fortunately, not all homes have a homeowners association to pay into. Purchasing a home with HOA-covered amenities could cost, on average, an additional $200-$400 per month.

Image

Maintenance fees: Ah, the pitfalls of being a homeowner. The costs that would normally fall to a landlord, like fixing broken plumbing or a heater on the fritz, will now fall on your shoulders. Some suggest saving one percent of your home’s value annually for maintenance.

Utility costs: Unless your rent has included the cost of utilities, this is probably already an expense you’re used to. However, if you’re moving into a bigger home with less energy efficient appliances, you should be prepared to see an uptick.

Start living like a homeowner

If you want to avoid experiencing sticker shock after your home purchase is complete, start living like a homeowner now.

Consider your current rental or home-ownership costs and compare them to the costs for a home in your target price point. Can your current budget handle the difference? Are you still able to pay for your necessities plus shore up your financial future through short- and long-term savings? Or do you find yourself feeling desperate by the end of the month?

Not only will this allow you to get used to the change before the stakes are higher, but it can also help you save more money to put toward unexpected costs for your future home purchase.

  • Facebook
  • Twitter

Leave a Comment

Recent News

Stateside

Mail ballot fight persists in key states, sure to slow count

September 23, 2022

Tweet Share Pin Email ABOVE PHOTO: Processed mail-in ballots are seen at the Chester County Voter Services...

Health

Wolf administration recognizes Suicide Prevention Awareness Month

September 23, 2022

Tweet Share Pin Email HARRISBURG, Pa. — Leadership from multiple state agencies joined advocates from Prevent Suicide...

Seniors

Art program helps people living with dementia

September 23, 2022

Tweet Share Pin Email ABOVE PHOTO: Sylvia M. paints a colorful pattern at an “ARTZ in the...

Color Of Money

EXPLAINER: How the strong U.S. dollar can affect everyone

September 23, 2022

Tweet Share Pin Email By Stan Choe ASSOCIATED PRESS  NEW YORK — The buck isn’t stopping. The...

Go With The-Flo

Roz Nixon visits with Lillias White to see her debut in the current Broadway hit “Hadestown”

September 23, 2022

Tweet Share Pin Email ABOVE PHOTO: Roz Nixon and Lillias White By Flo Anthony Curtis “50 Cent”...

Food And Beverage

What’s Cookin’? Roasted Curried Cauliflower

September 23, 2022

Tweet Share Pin Email Tweet Share Pin Email Related Posts What’s Cookin’? Garlic “Butter” Mushrooms and Cauliflower...

The Philadelphia Sunday Sun Staff