Are you getting ready to buy your first home? What an exhilarating (and probably nerve-racking) time.
Preparing to buy a home can be the cause of conflicting emotions. On the one hand, it’s incredibly exciting. The prospect of choosing a new place to live, potentially for the rest of your life…a place that you will make memories in, build the life you envision for yourself, and decorate to your heart’s desire. But on the other hand, it’s a very large, very expensive commitment, and one that you should be fully prepared to undertake.
If you’re getting ready to buy a home, here are three of the major expenses to keep in mind.
1. Down payment
The first large expense associated with homebuying is the down payment. Your down payment is the percentage of the purchase price of your home that you pay upfront, and it will vary based on the type of mortgage you choose, as well as the lender. Be sure you are ready to commit to a loan, as the average mortgage loan term is between 15 and 30 years, according to Rocket Mortgage.
To check if you have saved enough and see how your down payment translates to your home price and monthly payment, consider using a down payment calculator.
The second big expense comes at closing. Closing costs include the expenses and fees that you pay to finalize your loan, such as lender fees, third-party fees, and prepaid items. These costs are often overlooked due to the focus put on the down payment, but they’re extremely important to factor in.
3. Move-in expenses
Once you’ve gotten the paperwork and legal bit out of the way, it’s time for the fun part…right?
There is one more large expense that sometimes gets overlooked in the excitement of closing on a property. Move-in expenses include everything from immediate home repairs and upgrades, to moving services, to furnishings for your new space, and they can quickly add up. Make sure you have some money set aside for any move-in expenses that may arise.
Tips to stay on track as a first time homebuyer
Now that the expenses of purchasing a home are front and center in your mind, here are some tips for how to stay on track throughout the homebuying process.
- Work with a real estate agent. Real estate agents offer objective information and serve as your guide throughout the buying process. They expand your search power, save you time, and are in your corner when it comes to negotiations.
- Maintain your credit. Lenders want to see that your credit and money patterns are consistent, so it’s critical to maintain your credit during the purchasing process. Be sure to pay your bills on time, and avoid taking out a new line of credit or trying to influence your credit rating.
- Hire a home inspector. Don’t rely solely on the appraisal of the home, which simply tells you how much a house is worth. Be sure to hire an inspector as well, who will conduct an examination of the structure and systems of a house. You can use the results of the inspection to learn more about a property and negotiate with the seller.
- Stick to your budget. It can be easy to get carried away as a first time homebuyer, allowing your emotions to get wrapped up in “the perfect space,” but you made a budget for a reason, and it’s important to stick with it.
- Work with a financial advisor. At The Humphreys Group, we evaluate your priorities, goals, and resources to help you see the big picture when it comes to important financial decisions like buying a home. If you have questions or want a second opinion, reach out to us today.