SETTING A REALISTIC MONTHLY BUDGET FOR HOME OWNERSHIP
Every buyer’s situation is unique. In almost every case, proper planning ensured they had a pleasant experience owning a home. Many who failed to plan ended up losing their homes or became financially strapped each month, unable to get ahead.
CASH RESERVES – I strongly recommend every home-buyer have at least 12 months of cash in reserves once money for down payment and closing costs are paid. For example, if you’re buying a home with a monthly payment of $1,000, it’s a great idea to have at least $12,000 in cash in the bank after deducting for the money you’ll spend on down payment and closing costs. The reason for this is simple: Home ownership can often lead to large, unexpected expenses for maintenance and repair. While a home warranty can certainly protect a home owner from many surprise maintenance and repair costs of owning a home, they do not cover everything. Foundation repair, the cost of insurance deductibles for major losses and other household repairs not covered by home warranties can potentially add up to thousands of dollars.
MONTHLY PAYMENT – Decide what you can reasonably afford to spend per month for a house payment and make sure this amount includes the full PITI (principal, interest, taxes and insurance, plus mortgage insurance). Be careful when using internet mortgage calculators that do not include taxes and insurance. Most mortgage loans, such as FHA, VA, USDA and Conventional loans will require home-buyers to pay the additional costs of taxes and insurance as part of their monthly payment. Conventional buyers who put down 20% or more may be allowed to pay their own taxes and insurance.
LOCATION – Determine what, if any, additional costs you may incur by moving to a different part of town. For example, if you are moving to a city that will require you to use a toll road to get to work each day, don’t forget to factor the cost of the tolls, plus additional fuel, into your monthly budget.
ADDITIONAL COSTS – Utilities can be very expensive. If you are moving into a larger home than you live now, it’s likely that you may incur higher monthly expenses for items like electricity and gas. Additionally, make sure to factor in any costs that may be currently paid by your landlord if you rent (such as water, trash, etc.)
MAINTENANCE COSTS – If you’re a first-time home-buyer, don’t forget to include a monthly cost of maintaining your home. The cost of maintaining a yard and swimming pool can be over $100 per month in some cases.
Disclaimer – Please Read
This information is intended for general educational purposes and may not be applicable to every borrower. For personalized guidance about your situation, please contact us at 1 (561) 491-2739 or (800) 220-2753