Budgeting to Buy a Home

 

Buying a home is serious business, and several people don't know how important it is to create a budget for your home.

 

Some expenses that you need to think about, other than the house price itself, are closing costs, down payments, moving expenses, funiture cost, repairs and
or renovations, etc. 

 

Down Payment:  Since you probably don't have the full price of the house on hand, you will have to create a payment plan, along with paying a down payment. Your down payment will affect your overall mortgage cost.  We recommend that you put down a payment of 20% of the house's total cost. 

    Different down payments have different interest rates, which is important.  Putting down 20% of the house's cost gives you the lowest rate of interest, saving you a lot of money. For example, if you put down a 5% down payment, you will end up paying more than twice the original cost! Also, putting down a higher down payment gives you a lower private mortgage insurance (PMI), which just adds more money to your cost. With a 20% down payment you will have no PMI. 

 

Closing Costs: Closing costs on a house usually range from  3% to 7% of the original sale price. Here's what make up your closing costs: 

• Lending and application fees: These are costs for all your documents. 32% of your closing costs

• Third-Party fees: Fees for credit reports and appraisals. 37% 

• Prepaid interest and insurance: 24%

• Escrow account funds: Covers property tax and homeowners insurance premiums.  7%