The All-Inclusive Budget

PeoplePayingBills_515615743.jpgOne of the most important things you need to do before buying a house, is establish a budget. You need to know how much you can afford and how much the bank is willing to give you, but that number should include more than just the cost of the house. Here are some common costs that are overlooked when determining a budget.

Closing costs: Usually part of the negotiation, closing costs can be up to five percent of the purchase price, sometimes equaling a couple extra thousand dollars. More often than not, the seller will pay the closing costs, but if not, keep some of the budget available to cover those charges.

Renovations: Unless you are building a house from scratch, you won’t find everything that you are looking for. When purchasing a house, make sure to leave room for possible renovations. Whether you’re knocking down walls or simply changing light fixtures, renovations can make your new house feel more like home.

HOA/Property Fees: Besides mortgage, another monthly fee to consider when determining a budget is a possible HOA/Property fee. Sometimes costing a few hundred dollars a month, these are the fees that can break the bank. Always be sure to ask about HOA/Property fees and confirm there is room in the budget to accommodate.

New Furniture: Especially for first-time home buyers, new furniture can be a costly consideration. Maxing out your monthly mortgage payment leaves no room for paying off credit card bills from buying furniture and appliances.

Taxes: Property and school district taxes are costs that need included in your budget. These recurring costs can be heavy hitters, so make sure your budget doesn’t stretch your finances too thin.

Inspections: Not always required but often recommended, inspections are additional costs that one might not think of when calculating a budget. When you are seriously considering a house, getting it inspected for potential problems is one of the best things you can do. Besides a general home inspection, other surveys that potential buyers might consider are pest inspections, radon in air or water, lead paint, mold, and if the house qualifies, a well water inspection.

Insurance: Homeowners insurance is a known cost that one takes into consideration when purchasing a house, but have you heard of mortgage insurance? If you put down less than 20 percent, your lender may require you to obtain private mortgage insurance. Avoid this extra cost by staying in a budget range where you can afford a minimum 20 percent down payment.


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