{"id":10149,"date":"2022-08-16T15:27:49","date_gmt":"2022-08-16T22:27:49","guid":{"rendered":"https:\/\/www.flyhomes.com\/blog\/?p=10149"},"modified":"2022-08-16T15:27:57","modified_gmt":"2022-08-16T22:27:57","slug":"how-to-make-a-budget-for-buying-a-home","status":"publish","type":"post","link":"https:\/\/flyhomes.com\/blog\/how-to-make-a-budget-for-buying-a-home\/","title":{"rendered":"How to make a budget for buying a home"},"content":{"rendered":"\n

If you\u2019re ready to buy a home, the first thing you need to do is set a budget. A budget is more than just a price range for the home you want to buy. A homebuying budget is also a roadmap for you to understand your monthly expenses, down payment, and will help you set realistic goals. But how do you set a budget when there are so many different expenses and costs associated with buying a home? <\/p>\n\n\n\n

What goes into your budget? How much should it be? In this article, we\u2019ll go over everything you can expect to pay for a home and how to better understand how much money you should have before you start making home offers. <\/p>\n\n\n\n

Start by talking to a Flyhomes Agent<\/a>.\u00a0\u00a0<\/p>\n\n\n\n\n\n\n

What is a good budget for buying a house?<\/h3>\n\n\n\n

Many financial experts say you should spend less than 30 percent<\/a> of your monthly gross income on housing. For example, if you bring home $5,000 per month, your mortgage payment should be $1,500 or less. This mortgage payment budget should include an estimated amount for homeowners insurance, property taxes and other escrowed items such as HOA dues.\u00a0<\/p>\n\n\n\n

To be safe, consider adding a few hundred dollars to a house repair fund every month. In this example, that might mean spending $1,200 on your mortgage and putting $300 per month into a savings account for repairs and other unexpected expenses. <\/p>\n\n\n\n

There is no one rule for budgeting for a house. You’ll need to consider your gross household income, expenses, emergency fund, and future costs down the road. <\/p>\n\n\n\n

The best budget for a house is one well within your means so you can still afford your monthly payments comfortably. To figure this out, you have to understand what goes into your monthly payments and how to determine your expenses.<\/p>\n\n\n\n

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You’ll want to budget for more than just your down payment. Set aside at least three months of your predicted mortgage, plus enough for earnest money and closing fees <\/figcaption><\/figure>\n\n\n\n

What goes into your home budget<\/h3>\n\n\n\n

The purchase price of your home is a gateway to understanding how much the other costs associated with buying your home will end up being. For example, a more expensive home will have a higher mortgage payment, down payment, and, in most cases, higher property taxes and homeowners insurance. These are all costs you will want to predict and budget for as you settle on an ideal purchase price for your home.<\/p>\n\n\n\n

Here are all the different costs associated with buying and owning a home that you should prepare for when making your budget. <\/p>\n\n\n\n

Down payment <\/h3>\n\n\n\n

A down payment is the out-of-pocket cash you pay up front toward the purchase price of your home. While a mortgage loan will cover the bulk of the purchase price, most lenders require you to put down between 5-20% of the home\u2019s value to lower their financial risk and to prove that you have the funds necessary to make such an expensive purchase.  <\/p>\n\n\n\n

Some loan programs allow for down payments as low as 3%, but most mortgage loans require you to pay 20% of the home\u2019s purchase price to avoid the requirement for private mortgage insurance. Most lenders have a policy to lend up to 80% of the home\u2019s appraised value, which would require you to cover the extra 20%. Plus, you can avoid paying for private mortgage insurance<\/a> (PMI) if you put at least 20% down.\u00a0<\/p>\n\n\n\n

There are low-down payment mortgages<\/a>, which make it easier to buy a home for buyers who don’t have twenty percent for a down payment. But, if you can, aim for 20% for your down payment since a higher down payment will help keep mortgage rates as low as possible when it comes time to calculate your monthly costs and avoid the requirement for you to purchase private mortgage insurance.<\/p>\n\n\n\n

Underwriting fees<\/h3>\n\n\n\n

Your mortgage lender will charge fees that cover their costs for qualifying you for your mortgage loan, such as obtaining your credit report, processing your loan, and other required fees. <\/p>\n\n\n\n

The cost may be a flat fee or a percentage of your mortgage loan amount. While the cost varies by lender, expect to pay around a thousand dollars in lender costs plus other fees, such as title insurance and recording of your mortgage document.  <\/p>\n\n\n\n

Inspection <\/h3>\n\n\n\n

After finding a home, you will want to have a third-party expert inspect the home to make sure it’s in good shape. As the buyer, you’ll cover the cost of this inspection. Expect to pay a few hundred dollars. Note, some inspectors offer additional tests, like testing for radon, for an additional cost. <\/p>\n\n\n\n

Closing costs<\/h3>\n\n\n\n

At closing, you’ll make a payment to cover closing costs<\/a>, which includes your mortgage insurance if you need to purchase it, homeowners insurance<\/a>, property taxes, real estate agent fees, and the cost to transfer ownership of the property. In some cases, it might also include a payment to escrow for your first property tax payment.\u00a0<\/p>\n\n\n\n

The amount you’ll pay at closing depends on the amount of your mortgage loan, the state where you’re buying, and whether you’ve negotiated with the seller, or any of the third-party servicers involved to bring down the costs. For example, some buyers ask sellers to cover part of the closing costs or ask their lenders to roll the closing costs into the mortgage balance. <\/p>\n\n\n\n

On average, expect to pay two to four thousand in closing costs.  Some lenders will allow you to finance the closing costs. While this increases your mortgage loan amount, it does reduce the money that you will need to bring to closing to close your mortgage loan.<\/p>\n\n\n\n

Earnest money<\/h3>\n\n\n\n

Earnest money is a deposit you pay toward the purchase of the home that you usually pay to the seller when you sign the purchase agreement. <\/p>\n\n\n\n

Your earnest money deposit is a good faith deposit meant to show the seller that you are serious about buying the house and have no reason to think you\u2019ll have to back out. But anything can happen between when you make an offer and close on the home. Just in case you have to back out of the contract, the seller can hold on to the earnest money deposit to lessen any potential financial damage of having re-listed the property later. <\/p>\n\n\n\n

You can expect to pay 1-3% of the home\u2019s purchase price, though some sellers may ask for a flat rate of between $5,000 and $15,000. <\/p>\n\n\n\n

Monthly payments<\/h3>\n\n\n\n

How much you end up paying each month on your mortgage loan depends on the amount you borrowed, the type of mortgage loan you have, and the interest rate determined by your creditworthiness when you first borrowed and the term of your mortgage loan (15 years, 20 years, 30 years, etc.). <\/p>\n\n\n\n

Average mortgage rates in the summer of 2022 for the most popular type of mortgages\u201430-year fixed rate mortgages\u2014were a little above 5%. <\/p>\n\n\n\n

Use this mortgage calculator to get a sense of how much you may expect to pay each month based on your credit score, your down payment, and how much you would need to borrow. <\/p>\n\n\n