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How To Budget For Buying Your First Home

by / Thursday, 16 May 2013 / Published in Real Estate, Uncategorized

The prospect of becoming a homeowner for the first time is simultaneously exhilarating and frightening. The thought of finally having a place to call your own and make into your dream house is thrilling, but as you start looking into the process, it’s easy to become overwhelmed by the expense involved and the number of intricacies. There’s no need to be fearful, however, if you go into it well armed with thorough research, good resources and responsible planning. The better prepared you are, the less likely you will be to fall victim to any of the pitfalls that can plague first time buyers.

Buyers are often caught off guard by how many expenses there are in addition to just the price of a home. It is important to take these into consideration when looking for a home to buy as they can easily put you over budget. When you find a home that you’re interested in purchasing, it is important to have a home inspection as well as an appraisal done on the property. The home inspection should let you know if there are any major problems such as plumbing, electrical, foundation or the roof. This will generally cost a few hundred dollars, but could save you thousands in unexpected repairs. The appraisal is also key because it will let you know if the house is priced over market value. The last thing you want is to find out that you could have purchased the home for substantially less and are bearing extra financial burden that could have been avoided.

Other costs to consider over the long term are a potential for increased utility bills and the cost of maintaining the home. Buyers who have only rented in the past may not think about what it costs to maintain a yard or to repaint periodically. If you move from a two bedroom apartment into a two story house you may also suffer from sticker shock the first time you see a heating bill. Some of the costs associated with your purchase, including closing costs and title insurance, may be rolled into your loan. To make sure that you’re getting the best deal, you have to shop around for the right lender.

Before looking for a lender, however, you should have a price in mind that you can afford. If you look for a lender first, there is a chance they will pre-approve you for a loan that you can’t afford. Just because someone is willing to lend you the money, doesn’t mean the payments will fit your budget. Decide what you will be comfortably able to pay and look for a loan that matches your budget – not the other way around. Many credit counselors suggest that you start setting aside the additional monthly amount you would pay on a mortgage while looking for a home. This will give you the opportunity to take your budget for a trial run, so to speak, and let you know if the amount is indeed affordable.

When you are ready to find a lender, it’s important not only to compare rates and fees, but also to find one that’s reputable. Talk to your bank and see if they have suggestions to offer. Your realtor may also have good input on lenders. As you research terms with different lenders, be sure to compare down payment requirements, interest rates, loan terms and the length of the loan. While a loan with no down payment required may seem enticing, this is not necessarily the best way to go. Ideally, you would have at least 20% to put down on a home purchase. This is not always possible, but you want to make as much of a down payment as you can afford. This helps to keep your payments lower and could help you to get more desirable rates and loan terms as well.

Purchasing a home can be a stressful experience, but if you know what you’re getting into and you prepare yourself well, the process will go much more smoothly. Most people get tripped up by simply not knowing what to expect, what to look for, and what to consider. If you can eliminate as many of the unknowns as possible, you’ll be well on your way to becoming a satisfied homeowner with a balanced budget.

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