Buying a home can be costly! Between the down payment, closing costs, moving costs and then the monthly mortgage, you'll have many expenses to budget for when buying a home. Establishing a budget before getting started with the home buying process can help ensure that you're ready to buy a home. Here's what you need to know.
1. Know What to Expect
Before starting the home buying process, it's important to know what major expenses must be covered when making the purchase. Below are some of the most common expenses home buyers face when making their purchase:
- Closing costs, 2%-5%. Closing costs include a variety of administrative and legal fees that must be paid when escrow closes.
- Home inspection, $200-$400. The home inspection helps home buyers determine whether the home they're buying has serious maintenance problems that will need to be addressed.
- Appraisal, $300-$450. Mortgage lenders require home buyers to get a home appraisal to ensure the home is worth what the borrower is borrowing.
- Down payment, 0% - 20%. The amount the home buyer will be required to pay depends on what type of loan they have.
- Moving costs, variable. The moving costs depend on whether the move is in town, out of town, out of state or out of country, as well as whether the movers are providing full service or not.
2. Talk to Lenders
Home buyers need to speak with lenders to determine what kind of mortgage they'll qualify for, how much they'll be required to pay for a down payment, and how much their monthly mortgage payment will be. Calling lenders is important, as each lender will have different requirements and may offer different rates. Researching multiple lenders helps home buyers find the right lender and mortgage for them.
3. View Homes
Home buyers need to get a sense of how much they can expect to spend on the homes that are acceptable to them. Viewing homes in the neighborhoods where they would like to buy gives buyers the chance to determine their price range. Viewing homes can take time, so home buyers should look at homes in different neighborhoods and in varying price ranges.
4. Talk to Movers
Movers can be very costly. Home buyers can estimate the amount of money they expect to spend on movers by talking to different moving companies. People going through a local move may even choose to rent a moving truck and move on their own. The best way to get an estimate of moving costs is to contact moving companies, look at prices for moving boxes and supplies, and research truck rental prices.
5. Leave Money for Home Improvements
After moving into a home, most home buyers will continue to make improvements to the property. They may choose to update the landscaping, paint the home's interior and make other upgrades. Even home buyers who don't plan to make major improvements may still need to make small purchases like new blinds, curtains and furniture.
Home buyers must set some money to the side for home improvements. Those who plan to buy a fixer-upper should set aside much more than buyers who are looking for a turn-key property.
Contact a Real Estate Agent
If you're a home buyer who will soon be purchasing a home, get help from a real estate professional. A good real estate agent can help you decide which home is right for you. Your real estate agent can also help you negotiate a reasonable price for your house.