Budgeting for homeownership

I have many clients that have the misconception the only costs to save up for is the 20% down payment but they do not take into consideration many of the other costs that go into home ownership just in the initial buying process along let alone the ongoing costs projected.

Reserves-for cash reserves, lenders will require up to six months of mortgage payments including your principal, interest, taxes and insurance.

 Closing costs, pre-paid taxes/insurance- closing costs include title fees, inspection, escrow, credit report, appraisal fees all add up to anywhere from 2-5% of your purchase price. If you are buying a house for $400,000 then you would be looking at anywhere from $4,000-$8,000 in costs. Good news is you can always take a slightly higher interest to get a lender credit applied towards your closing costs. Government programs such as VA and FHA may allow the seller to pick up anywhere from 4-6% closing costs for you. Always ask and have your realtor negotiate this.

Maintenance, relocation, homeowner’s association (if applicable)-as a homeowner, anything that breaks now become a cost out of pocket. Many of which are not things you can push out. I see most client within the first six months of buying a house typically will rack up debts on their credit card if not planning ahead.

Avoid being house poor-the takeaway from this is to be prepared, seek guidance and stay conservative with your purchase price. If a lender approves you up to $400,000 it would be wise to stash away additional savings for any repairs and maintenance costs you have around the house.