Many who are inexperienced in home buying, or who simply aren’t at that point in their life, likely have no idea what is involved. It’s common to think you need to worry about only 2 things: a mortgage approval and a down payment. But getting your new home finances in order means looking at the big picture – before and after the purchase.
Before you buy
Yes, it’s a good idea to get a mortgage preapproval and you’ll want to have a sufficient down payment based on your price range, but that’s not all. Additional costs include a lawyer, a home inspector, and securing home insurance; property taxes are another consideration. You’ll want to have some wiggle room in your savings account to cover your closing costs and anything else that may come up.
After you buy
So you managed to save up for a down payment, but have you considered what the actual monthly cost of your home will be? It’s a good idea to run the numbers realistically because although you are approved to purchase a home within a certain range, there is a good chance that the upper part of that range is unaffordable. When you are figuring out your new home finances per month, include the mortgage, insurance, utilities, condo fees if they apply, property taxes and other incidental costs like your cell phone. Although separate from your home, including car payments and car insurance into this calculation is advisable. You want to have a clear idea of your expenses so that you can execute a plan to cover them effectively, without being house poor. Once you own your home creating a visual budget is a good idea.