Homebuying: Budget Breakdown
When buying a new home, there are more costs than the down payment and your monthly dues. It's essential to break down your budget and figure out the best financial strategy that works for you and your budget. To help you plan for your purchase, we've broken down the costs associated with buying a new home.
1. Down Payment
The down payment is always seen as the most considerable expense when getting a mortgage. However, if putting 20% down doesn't make financial sense for you in the moment, there may be other options available to you. It's always best to talk with a loan officer about finding the smartest way to approach your down payment.
A home inspection is an assessment of the property's physical structure and mechanics. Home inspections usually run $300 - $500. However, it's very much worth it. You'll want to catch any significant issues with your new potential property as soon as you can. Be sure to set aside cash for this, as you'll likely pay this upfront rather than with the closing costs.
There are two types of home insurance you should know about: mortgage insurance and homeowner's insurance.
- Mortgage insurance is added to those who have put less than 20% down. Usually, around 2% of the loan amount, these premiums protect the lender from defaulting on the loan.
- Homeowner's insurance varies by location and could be built into your monthly payment. They help protect you from paying out big due to any potential hazards like flooding or earthquakes.
There are a variety of fees that come with buying a house. Keep an eye on any HOA (Homeowner’s Association), co-op, or condo fees you may have to pay as they vary. These fees usually go to repairing or improving the shared amenities of your property.
5. Closing Costs
Closing costs are the lender and third-party fees paid at the end of the home-buying transaction. You will receive an official loan estimate from your lender that you can use to comparison shop with other lenders to prevent any surprise charges at the end.
6. Moving Costs
You have to get to your new home with all your things somehow! Moving costs vary widely depending on if you're moving across the country or down the block. If you're lucky, find a loved one with a truck for the lowest cost moving.
If you're thinking about making a move towards buying a new home, make sure to factor in the full cost, which means not only saving up for the down payment and other upfront costs but making sure the long term reoccurring payments don't overwhelm your budget. If you have any concerns or need help finding your financial path to homeownership, it's never too soon to talk to a loan officer.