The Do’s and Don’ts of setting a budget for your new house

Sakera Patel S

Introduction

You’ve just thought about buying a new house and it feels amazing. But what many people don’t realize is that when they move into their first house or apartment, it’s not just the initial outlay of money to buy the property that will make your head spin – there are additional costs involved, from setting up utility accounts to making home improvements and finding furniture. How do you set a budget for a new house? To help you get started in figuring out how much you can afford every month, here are some of the dos and don’ts of setting a budget for your new house.

Do’s

Use an Excel spreadsheet

When I was on my way to buy a new house, the first thing I did was to create an excel spreadsheet. This will let you take care of all of your financial information in one place. Plus, it can make it easier to track any big expenses (like moving costs) in real-time. Also: Establish an Emergency Fund: It’s important to have an emergency fund from day one so that you don’t have to rely on credit cards when unforeseen expenses arise.

Calculate every source of income, the expenses- both housing and non-housing

Add all the sources of your income, calculate all the expenses, including the housing and the non-housing expenses. By doing this, you can have an idea of the money you are left with at the end and you can save up for further expenses. 

Ask Real Estate Agents About Additional Costs

Many properties are listed at prices that don’t include import fees, like closing costs or transfer taxes. When you’re looking at house listings, be sure to ask real estate agents about these fees so you can plan your budget accordingly.

Put at least 20% Down

Real estate is an expensive undertaking, but you can cut your costs by putting at least 20% down. If you put at least 20% down on your new house, you won’t have to pay private mortgage insurance (PMI). And because most lenders require PMI if you don’t put 20% down, you may be able to negotiate with them to drop it. Alternatively, look into getting an FHA loan—it doesn’t require PMI.

Consider buying in an Up-and-Coming Neighborhood

Buyers who want to save money often go straight to looking at fixer-uppers, but if you’re trying to set a budget, buying an older house that needs work might not be in your best interest. Instead, Buying in an up-and-coming neighborhood can get you more home for your buck. Prices are still low, but they’re rising fast.

Go slow with Renovations

Sometimes, you may be so eager to get your money’s worth from your new home that you rush through renovations. However, it’s important to take your time with these projects so that they’re done correctly and within budget. You can also spread out expenses by working with a contractor who allows you to pay as you go, so long as they are trustworthy. This gives you a chance to evaluate each stage of work.

Don’t

Rush into a purchase

Even if you have your heart set on that mansion, you should hold off buying it—at least until you’ve secured your down payment. Setting a budget for your new house is about making smart financial decisions; it’s about ensuring that there are no unnecessary purchases once you move in.

Forget Utilities and HOA Fees

Moving into a new house is exciting. But, don’t get too excited! There are lots of costs associated with buying or renting a home, including everything from real estate taxes to utility bills. If you’re moving into an area with HOA fees, those may take up part of your budget as well. To make sure your new home will fit in your budget, carefully consider what you can realistically afford. Once you have a realistic idea of how much money you have to spend, it’s time to start shopping around!

Forget closing costs and broker’s fees

Last but not least, you’ll want to find out how much money you’ll need in total to buy that house. The price tag usually includes closing costs—fees associated with buying or selling property and often requires an additional sum if you use a real estate agent. If you’re in an active real estate market, that fee might be higher than usual.

Conclusion

Setting a budget is important when you’re buying your first home. A good budget will help you prioritize what you need to buy now. While setting up a budget isn’t an exact science, there are several steps that you can take to get the job done correctly and thoroughly, this article has reminded you of all the expenses you should take note of. 

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