Home Budgeting Tips For First Time Homebuyers
Finance

Home Budgeting Tips For First Time Homebuyers

Buying a home involves a lot of work. The biggest challenge is budgeting enough money to make sure you have an adequate down payment before you start hunting for houses. However, if you plan your home buying process in a structured way, you will ensure that you can get your dream home at the right price.

Let’s take a look at some important tips to keep in mind for first time buyers—especially when shopping for your first mortgage:

1. Create a budget
The first step in your home buying process should be to create a budget that will estimate all the expenses involved in buying a home. Remember, the cost of the actual home is just one of the expenses. While making a budget, the following factors needs to be kept in mind:
● Money needed for the down payment.
● Monthly expenses for repayment of the loan and interest.
● Lawyers fees.
● Other expenses like a commission for an agent, bank charges, etc.
● Furniture and essentials if you don’t already have your own.

Once the estimated amount is decided, the next step is to make a financial plan to raise this amount.

2. Raising the money
You also need to raise money for the down payment. A down payment of up to 20% of the home value is typically essential. This downpayment can be saved by reducing unnecessary expenses to save more money. The money saved can be invested in a mutual fund or a deposit account to generate more income.

3. Securing a mortgage
Most people buy a house via a mortgage. This mortgage may be secured through a bank, lending institution, family, or through a local assistance program. A good rule of thumb is making sure that the monthly mortgage amount does not exceed 25% of your income as this can be a strain on your monthly budget and leave you with a lack of funds to deal with groceries, essentials, and other emergencies. Most mortgage providers would also look at your debt to income ratio before approving the loan.

4. Other expenses
Expenses will occur aside from the mortgage. Consider that you’ll also have to pay for home insurance, agent commission, bank charges, taxes, lawyers fees, maintenance, and any repairs that need to be made before you move in.

5. Compare rates
Don’t only talk to one lender, talk to a lot of others. Compare interest rates from different lenders so that you can get the best option out there. Also, check the payment terms and other conditions before you sign up for the mortgage.

6. Plan for the long-term
Before you go ahead and buy a home, keep in mind the long-term perspective. Look at the locality and neighborhood—also check the interiors and see if it would suit your family requirements on the long term.

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