Calculating Your Budget
Buying a new home is expensive and not just because of the down payment.
Remember the following when calculating your budget:
1.
You may owe more than just a down payment at signing.
Tina Russell/The Penny Hoarder
Depending on the contract youve worked out with the seller, you may also be responsible for closing costs.
All together, mine totaled nearly $10,000.
Dont forget moving expenses.
Probably not as good as youd like.
It always seems like an uphill battle to build (and keep) a decent amount in savings.
But what if your car breaks down, or you have a sudden medical bill?
Ask one of these companies to help…
Monthly mortgage payments cover more than payments on your home.
Plan for upkeep expenses.
When you own your home and your water heater stops working, youre on your own.
Did you know?
Thats why its important to maintain your emergency savings.
Grow your emergency savings before buying.
Experts agree that you should save up six months of expenses for emergencies.
(Easier said than done, I know.)
But still, when buying a house, dont pour all of your savings into your down payment.
Determine what youre comfortable spending each month.
Spend no more than three times your annual salary on a house, but use that as a guideline.
By no means do youhaveto spend that much on a home.
Saving for a Down Payment
When purchasing a house, youll almost always need a down payment.
Here are a few tips for saving for your down payment:
7.
Reduce your expenses and increase your income.
Shoot for 20% of the cost of the jot down of house you plan to buy.
Doing so will earn you better rates and will keep you from having to pay PMI.
PMI is generally required on any home loans when the buyer puts down less than 20%.
If you cant hit 20%, put as much down as you comfortably can.
Remember, though: leave some money in your emergency savings.
While saving for my down payment, I invented a rent rule to help me save.
Then I subtracted what I was currently paying for rent each month.
That move quickly grew my down payment savings by several thousand dollars.
She obviously wanted to get the best deal for us.
Not everyone has that luxury.
Call all of them and interview them.
Now call all ofthemup and interview them.
Youll get an idea of who you like and the kinds of rates you might get.
Dont go it alone.
Plus, your real estate agent should drive you to all homes, which will save on fuel costs.
That might sound cheap, but its a true Penny Hoarder consideration.
Choose a buyers agent.
A buyers agent is a real estate agent who exclusively helps buyers find homes.
That means they do not ever list homes for sale.
Ask your real estate agent to confirm that he or she is a buyers agent before signing with them.
If you are still unsure, you canperuse the contractfor mention of a buyers agent agreement.
If there is no such terminology, assume this is not a true buyers agent.
Ask potential real estate agents good questions.
Interview your agent as thoroughly as you would a babysitter for your kid.
A good real estate agent will be happy to answer your questions.
The best real estate agents just split the sellers commission, meaning you dont pay a cent.
Know the types of mortgage loans available to you.
Spend some time researching loan options online.
Mortgage options include conventional loans, FHA loans (Federal Housing Administration), etc.
Each loan punch in has different requirements and qualifications.
Dont just go with the lender your real estate agent recommends.
Go with the lowest interest rate you’re free to find.
Dont open new lines of credit.
Your credit score plays an important factor in securing a loan.
Before visiting your first home, ask your chosen lender for a pre-approval letter.
If youre not crazy about the walls, you might paint them.
(We did ours for just $700.)
However, there are certain things that cant be changed or are much more expensive to resolve.
Check these things when touring a home.
Roof and windows:When was the roof last done?
How about the windows?
Are they good windows that will keep utility costs down?
Foundation:Are there foundation issues with the home that could necessitate expensive repairs?
Appliances:How soon will appliances need to be replaced?
Another thing to consider: location, location, location.
Consider your wants and needs.
In some states, home inspections happen before you make the offer.
In other states, they happen after offer acceptance, but the contract is contingent upon the inspection.
If youre not happy with the findings, you’re free to still back out of the sale.
Dont cut costs on inspections.
Your cousin may be aplumber, but that doesnt mean she is qualified to do an actual home inspection.
Hire someone who regularly does inspections and confirm they are thorough.
you’re able to check resources like Angies List, HomeAdvisor and Yelp and ask about theircertifications.
Accompany the home inspector.
You are allowed to be at the inspection.
Check the uncommon things.
Not every inspector tests for mold, radon, lead and pests.
Ask before hiring, and only pay for an inspector who will check for these crucial red flags.
Note: This will likely make your home inspection more expensive.
However, what you offer for a house is ultimately up to you.
Negotiate like a pro.
And soon enough, youll have a place to call your own.
Timothy Moore is a writer and editor based in Germantown, Ohio.
(Can you sense my millennial sarcasm there?)
You know which ones were talking about: rent, utilities, cell phone bill, insurance, groceries…
