When you're buying a home, there are many things you need to consider in your budget. Many expenses can add up quickly, from the down payment to closing costs. (Tip: This is where a realtor makes life easy for you, tap into their knowledge and experience to know what to prepare for!) Being prepared with your budget is vital when buying a home.
If you're not sure where to start, here are a few tips from experts:
1. A Down Payment
The first and most apparent expense you'll need to budget for when buying a home is a down payment. How much you'll need to save will depend on the price of the home you're interested in and the type of mortgage you qualify for, but typically, you can expect to need at least 3-5% of the purchase price.
The National Association of Realtors (NAR) says:
"One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership. Having this knowledge is critical to know what to save . . ."
2. Earnest Money
Earnest Money are funds you pay as a show of good faith when you make an offer on a house. This deposit works like a credit. You're using some of the money you already saved for your purchase to show the seller you're committed and serious about their house. It's not an added expense, it's just paying some of your down payment up front.
2. Closing Costs
In addition to your down payment, you'll also need to budget for closing costs. Closing costs are the fees associated with finalizing your mortgage and purchasing your home. These can vary depending on the lender you use and the state you're buying in, but they typically range from 2-5% of the purchase price.
3. Moving Expenses
Once you've purchased your home, you'll need to budget for the cost of actually moving into it! This can include hiring professional movers, renting a truck, and buying packing supplies. Depending on the distance you're moving and the size of your home, this can cost anywhere from a few hundred to a few thousand dollars.
4. Home Repair and Maintenance
Finally, you'll need to budget for ongoing home maintenance and repairs. Your home may be move-in ready, or it may need some TLC. Saving money for things like painting, landscaping, and cleaning are important.
Buying a home is a big financial decision, but if you budget carefully, it can be a very rewarding one! Knowing what to budget for in the homebuying process is essential. By taking the time to save for a down payment, closing costs, moving expenses, and repairs and maintenance, you'll be in good shape to become a homeowner. To make sure you understand these and any other expenses that may come up, give me a call and I can help you on what to expect when you buy a home.