Costs of Purchasing a Home (and how to budget for them)
Updated: Jan 11, 2021
When it comes to owning a home, you may be surprised at how affordable it can be. Many prospective homeowners believe they will need 20% down in cash in order to purchase a home, but there are programs and mortgages out there that require as little as 3.5% down. Once you know the costs that go into purchasing a home, it is much easier to visualize how you can make homeownership happen!
The main costs when purchasing a home are the down payment (3.5%-20%+ of the purchase price), the closing costs (the bank and title fees), and the prepaids for your mortgage escrow (property taxes and home insurance). There is a lot that goes into figuring out your costs, but don't worry. You'll have your mortgage lender and me on your team to help you figure it all out.
Before you make an offer on any home, I will be able to give you the estimated costs due at closing (the main three added up) as well as your monthly payment. These costs are all figured out on the Purchaser's Cost Sheet and it's one of my favorite things to do for my clients. I want each and everyone of my clients to have the most accurate information so they can make better decisions.
I can sit and talk different scenarios all day, so if you're looking to jump into the buying game but want to talk about how much it may cost, reach out and we can go over all of that. I can also help get you in touch with a lender to see what your buying power/home budget may be!
Once you know how much it will cost to purchase a home, it will be good to start a budget to help you get to that goal. It can be as simple or as elaborate as you like, but the main things you want to learn are:
monthly income (all sources)
monthly fixed expenses (groceries, rent/mortgage, transportation, utilities, insurance, daycare, school, etc.)
savings + givings (saving account and any donations)
monthly wants (extras like dining out, entertainment, memberships, etc.)
Having all of your finances out in front of you will make it easier to adjust where needed so that you can find the way to hit your home-buying goals. Once you see where you are each month, you could understand where you'd be comfortable in terms of a new home mortgage - and with today's low interest rates, you really could have a home mortgage for a comparable price to renting.
If you have any want to get into a new home, the best place to start is talking with an experienced Realtor who can help guide you on costs for homes in the market. You will also want to get in touch with a lender so they can take a deep dive into your finances to set your buying power (how much you can afford to spend). Don't have a lender? No worries, I have recommendations for lenders who have successfully helped my clients purchase homes, and I love making introductions.