What To Consider For Your Budget If You’re Buying A Home For The First TimeMarch 12, 2019 2:06 am
So, you’re buying a home for the first time. You (and maybe your family) made the decision to leave the city life for a home that reflects your current lifestyle a bit more. For all the ways that the decision has prompted a sense of peace and acceptance for the chapter that is to come, there’s also a lot of questions to be answered.
One of the questions we get the most revolves around cost of owning a new home, particularly about how a first-time homeowner should be creating a budget. Alana Mitnick Benjamin, a member of Suburbit’s realtor network and an Associate Real Estate Broker at Daniel Gale Sotheby’s International Realty, helped answer some of your most pressing questions, while also helping us come with a list of things you need to think of as you prep your budget.
Information is power, especially during the homebuying process. While we know you’re in good hands with one of our partner realtors, it’s never a bad idea to have a direct link to point to.
While pre-approval isn’t the end all be all of what you can afford in a home, Mitnick Benjamin shares that it is a really essential first step. Finding someone you trust to run your financials and give you a clear picture of what you can afford and what you should have saved in a rainy day account is essential. While getting a pre-approval can be done at any point in the homebuying process, Mitnick Benjamin suggests getting one before you start looking at homes because it will ensure that you know exactly what you can afford and will avoid you getting your hopes up about a home that may be out of your range.
So, here’s the thing, new trends are showing that in some cases all you would need is 5% down in order to buy your first home. Traditionally though, 20% down is the most common breakdown. In these cases you’d be paying 10% as a down payment, where it will be held in escrow until closing, while the next 10% is what you’ll bring when you sign on the final dotted lines. Depending on the costs of the home you’re looking at, your initial down payment can run the gambit. The important thing Mitnick Benjamin emphasizes is to make sure that you’re sure of the home you’re going to put any kind of down payment on is the one you really want – because there are no backsies in real estate.
Attorney, renovations, home inspections, oh my
The difference between renting and buying a home usually come down to what you’re the owner of and what, in turn, you’re responsible for. In this case, prior to closing on your first home, you are responsible for attorney fees (which can net you into the thousands of dollars), home inspections (which come in between 500-800, on average) and closing costs (including things like bank fees, title fees, or taxes which can amass to anywhere from 2-5% of the total cost of the home.) When Mitnick Benjamin was explaining all the costs to us, she was clear in noting that the types of expenses and the amounts truly depend upon the home you’re buying.
Property (and their BFF, taxes)
Property taxes — anyone’s guess or a sure thing? How about, they’re actually a bit of both. Whoever is holding your hand through the homebuying process can help guide you through what local property taxes look like (fun fact: some municipalities have more taxes than others). You can also use this tool to help give you a general idea of what kind of hit you should be anticipating to your bank account. The gist with these, as with closing costs, is to estimate more with the hopes of being pleasantly surprised if it’s less.
While this is only a general list of what you should consider when budgeting for your first home, it is a good place to start. Particularly, you’ll want to match with your expert agent as soon as possible so that you can start down the road towards finding the right house. And, if you haven’t been pre-approved yet, your agent can help guide you through that process. As you’re navigating the ins and outs of turning an on-the-table offer into a forever home, think closely too about all the other expenses (hello, car) that will be new to you, but turn into quick regulars, once you do move in. Also consider renovations (which is left to your discretion) and furniture. We know you love that one IKEA couch that’s moved with you from apartment to apartment, but with more space comes more room to decorate and comes more charges to your credit card.
Taking our 10-question quiz is a good way to figure out what your starting point is and where you should go from there.