How Much Should You Spend on Your First Home?

How Much Should You Spend on Your First Home?

There may not be an exact amount that we can provide for you. You will have to do that on your own with your details. But let’s look at some estimates by reviewing what you can expect to spend on your first home purchase. 

 

Down Payment

With every purchase of a home, you will have to provide a downpayment. Depending on how much you can afford will, of course, determine your down payment amount. Generally, a downpayment is about 5% of the total cost of your home. However, the bank or buyer will not fight you on a larger down payment.

If you can afford more money upfront, then you will have more flexibility with your loan. A higher down payment usually affords you a lower interest rate. This is going to help you save money because interest is a charge to even do business. Interest helps you in no way at all. 

In addition to interest, you may be required to purchase private mortgage insurance. However, there are ways to avoid this, including Piggyback mortgages, lender-paid mortgage insurance, and loans that don’t require a PMI even if you put down under 20%. Eligible veterans may be entitled to additional benefits through their banking systems.

Closing Costs

When we read about steps to buying a house, we often hear about these mysterious closing costs. What do they include? Why do we need to pay them? Well, it is generalizing word for all of the additional fees from inspections, appraisals, and paying other entities that assisted with the purchase.

Percentage-wise, you’re going to spend about 3-6% of your total on closing costs. There are government-funded programs that can assist you if you think you may have a hard time paying for all of the additional costs. You can see if you can get some of the fees integrated with your loan as well.

Your closing costs will differ based on things such as what kind of loan you have taken out and your local housing market. Speak with your agent or an advisor on a list of all these additions. They can provide you with a closing disclosure.

Utilities

Upon moving into your new home, you will find that it is quite expensive for a home to operate. Some of your utilities may have been included in your rent if you have previously rented. Many rental properties offer heat or hot water included in the price of rent.

If you did have to pay for all of your utilities, you might not have a large space to heat. Additionally, if you were living alone and now moving in with a partner, there’s going to be double the number of people using lights, water, and heat. It may not seem that expensive, but these little bits add up.

You’ll have to consider what you will need for utilities to set up or transfer utilities into your new home. This should most certainly be considered when you are budgeting for your home purchase. It would be wise to have a cushion on these budgets as well. If you live in a new climate, you may not know how much you’ll spend on utilities until you’ve been there for a month. 

There are always going to be other expenses that you may miss. You may need new furniture for your home. Not much of a new home if you don’t have anywhere to sit down and enjoy it. You will also be responsible for property taxes each year. Generally, these can be wrapped into your mortgage payments. Saving for a home is no small feat, and the extra money you can save before your adventure can only benefit you. 



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