A home should be a fun place for your family – not a burden on your finances. If you’re considering homeownership, you may be surprised by the extra costs that pop up during the purchase process. We’ve got some tips and insight that will give you a better idea of what to expect financially.
First things first – the sales price of a home will depend on the size of the home you choose and its location. When you start to consider home-buying expenses, you’ll probably think of the sales price first and how much money you will put towards the down payment. In addition to that, consider saving for other potential expenses, such as the following.
Closing costs are a mix of different fees incurred by the buyer, and they vary depending upon the lender, price of the home and type of loan you get. Some costs you will continue to pay, like insurance and taxes, while others may be nonrecurring fees relating to the appraisal, attorney services, pulling your credit report, escrow, and so on. Closing costs typically amount to 2-7% of the purchase price, so if the home costs $200,000, you may want to plan for $4,000-$14,000 in closing costs.
Maintenance & Repairs
The amount of money annually spent on repairs and maintenance depends on the age of your home, the condition it’s in, the climate of where you live, etc. Nevertheless, experts suggest budgeting at least 1% of your home’s value for such expenses. That means, if you buy an old, $300,000 home, you probably want to set aside at least $3,000 a year for maintenance. (That’s $250 a month. Yikes!) After your first year of homeownership, review the amount of money you spent on repairs and maintenance, and if 1% wasn’t enough, then adjust your savings allocations appropriately. Also think ahead to what you might need in the upcoming year. Does your fence need repairs? Is your roof leaky? Kitchen appliances a little worse for wear? Planning ahead and saving up can help you meet the costs and minimize financial stress.
Furniture & Décor
A fun part of homeownership is making a house your own so remember to include money for decorating when you start to save up. If you’re on a budget, you might decorate with $1,000 a room, but if you shoot for high-quality pieces and high-end brands, you could be looking at $10,000 a room. Needless to say, planning ahead is a must. In order to create realistic savings goals, research the cost of your favorite paint or wallpaper, furniture, curtains or blinds, or any other pieces you’re considering adding, and work from there.
If you have a mortgage, the lender will require you to maintain homeowners insurance, but it doesn’t cover everything, which means you may need to budget for supplemental insurance as well. If you buy a home in an area that’s prone to tornadoes, floods, hurricanes or earthquakes, your lender may require that you purchase additional insurance to cover those threats. Of course, the costs you incur will be dependent upon the amount of additional coverage you need and the particular insurance plan(s) you choose.
Insurance can seem confusing and intense, so don’t be afraid to talk with a Money Coach who specializes in insurance and can help you feel more confident about your choices.
Buying a home is a big deal and a big cost. You can also work with a Money Coach who is a Mortgage and Real Estate Specialist, so you know what you’re getting into. We want to make sure that you and your family end up with a house that fits your American Dream and your budget. Call 888-724-2326 to get started.
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