Money Tips on Buying a Home

No matter where you buy a home, there are basic things to consider. People fall in love with the idea of their own home, but they often are not aware of all the responsibilities  that come with owning home. For example;  are you setting a budget? By budget, I mean make sure to calculate a monthly payment that you can comfortably afford. Then discuss this amount with your lender. You don’t need to use everything you are approved for. This also means to make sure you include PITI (principal, interest, taxes and insurance) in your budget, something that is commonly overlooked and then – by the time you fall in love with a house you have made an offer on- you are already out of budget. Mortgage calculators will show you how much you’ll pay towards principal and interest every month.

Next, understand the cash that will go into buying a home, such as paying for a down payment and closing costs. The down payment typically varies from 5% to 20% or more. Putting less than 20% down will typically require you to pay for private mortgage insurance (PMI). Closing costs could be about 3-7% of the total loan amount, and will include charges such as loan origination fees, title insurance, and appraisal fees.And no, not all sellers are going to want to pay all or half of your closing costs! Keep this in mind when making an offer. You may have to come up with more money.

Budget for private mortgage insurance. For conventional financing, this is typically necessary if you don’t put down at least a 20% down payment when you buy your home. If that’s the case for you, you will likely need to pay private mortgage insurance (or PMI). Make sure you know how much this cost will be and factor it into your monthly home payment budget. And yes, this is yet another cost that you have to realistically consider when creating your budget for your monthly home owner investment.

My final tip is to really research your utilities. If you’re moving into a larger home than you’re used to, a home that is newer or older than you’re used to, or located in a climate that’s hotter or colder than you’re used to, visit the local utility office and ask them to give you an idea of what the home’s energy bills have typically been. This can help prevent being surprised by a higher utility bill than you’re expecting. I suggest doing the same with water and sewage, too. The last thing you need are any financial surprises.

Buying a home is a great investment as long as you understand the financial obligations and what your budget really is.

Sam Benson