What Should You Budget for When Buying a Home?
So you're in the market for a new home—congratulations! This is an exciting time, but it's also a time when you need to be mindful of your budget. There are a lot of costs associated with buying a home, and it's important to be prepared for all of them. Here's a quick rundown of some of the things you'll need to factor into your budget when buying a home.
The Down Payment...
One of the biggest expenses you'll need to budget for when buying a home is the down payment. The down payment is the lump sum of money that you'll pay upfront towards the purchase price of the home. The size of the down payment will vary depending on the type of mortgage you get, but it will typically be between 3% and 20% of the purchase price.
If you don't have enough cash on hand to cover the down payment, don't worry—there are plenty of low- and no-down-payment mortgage options available. However, keep in mind that these types of loans often come with higher interest rates.
In addition to the down payment, you'll also need to budget for closing costs. Closing costs are all of the fees and charges associated with finalizing the purchase of your home. These costs can vary widely, but they typically range from 2% to 5% of the purchase price.
Some common closing costs include appraisal fees, loan origination fees, title insurance, and recording fees. Be sure to ask your real estate agent for an estimate of closing costs so you can factor them into your budget appropriately.
Home Maintenance Costs
Owning a home can come with a share of maintenance and repair costs. Even if your home is brand new, you'll still need to budget for things like painting, landscaping, and general repairs. And as your home ages, you'll need to account for larger repairs like roof replacements and HVAC system repairs or replacements.
It's hard to estimate exactly how much you'll need to spend on maintenance and repairs each year because it will depend on factors like the age and condition of your home, as well as how often you use certain appliances and systems. However, a good rule of thumb is to set aside 1% of your home's purchase price each year for maintenance and repairs. So if you buy a $250,000 home, you should budget for $2,500 in annual maintenance and repairs.
There are a lot of things to consider when budgeting for a new home—but don't let that discourage you! With careful planning and consideration, you can find a beautiful new home that fits both your needs and your budget. Just remember to factor in things like the down payment, closing costs, and annual maintenance and repair costs when creating your budget—that way there won't be any surprises down the road!