If you’re looking for the top budgeting tips as a first time home buyer, you’ve come to the right place. Buying your first home will be one of the most expensive purchases you’ve ever made. So, you want to make sure you get the payments right. Or it can totally throw off your budget and negatively impact your life. Keep reading for the top tips to help you set and stick with a budget when shopping for your first home. I’ll wrap up by including a free Down Payment Savings Tracker that you can download for free today.
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Budgeting Tips for First Time Home Buyers
- Eliminate debt – most lenders won’t require you get rid of all of your debt to purchase your first home, but it sure will be helpful. For the prudent savers out there, getting rid of all debt is just the right thing to do. It’s one less bill to pay, and one less company (hello, Visa card and auto loan) telling you how to spend your money each month. But the spenders out there can even find fun in getting rid of debt. You can do what YOU want to do with your extra money. The more money you have available each month after housing, food and necessities, can go towards fun things like vacations, clothing and décor items. Tell Visa and Amex to go kick rocks!
- Create an emergency fund – before you purchase a home you should have an emergency fund. God forbid something happens to your house. But you’ll have money set aside to fix it up. If you ever find yourself in between jobs, this emergency fund will help as well. Anything that pops up as an unplanned emergency would come from this account. And as soon as you’re able to replace those funds, you just add them back, so you’ll always have a cushion for the unexpected.
- Create a budget– we can’t talk about budgeting tips without talking about making a budget, now can we? Even if you already have a budget, I’d like you to make a new budget based on your new housing costs. Of course, you’ll adjust your rent payment to now include a mortgage. But I also want you to estimate your HOA costs, any potential lawn care or savings that you’ll set aside for maintenance. Get rough estimates for car insurance and utilities if you’re moving to a new area. And then add these new amounts into your new budget.
- Call a lender – most agents will require that you have your pre-approval before they start taking you to showings. The first reason is, the agent wants to know that you’re serious and have the potential to qualify for the loan. The second reason is that many sellers require this documentation before they allow you in their house. The next reason why pre-approval is important is because it’s helpful for you to be aware of what the lender says you actually qualify for. And last but not least, you’ll need to submit that qualification document along with your offer.
- Determine how much house you can afford – I want you to go against the norm and decide how much you can afford abased off a solid plan. Consider the lenders approval amount and estimated payment amount. And then do some research on what your new housing costs will be. Then look at your budget, margin and knowing how you like to live. Now, it’s time for you to determine how much house you can comfortably afford. This amount should be based on what you’re comfortable with, considering what you plan to save away every month for maintenance, emergency savings and retirement account.
- Prepare for extra costs – like I say with many purchases, the amount you see is just the “entry cost”. Just like buying something online will add in the cost of taxes and shipping. Purchasing a home comes with other costs as well. You’ll need to have money set aside for your down payment and closing costs. And maybe even the appraisal, home inspection and homeowner’s insurance fees.
- Set aside money to move – moving ain’t free, ya’ll! Many utility companies require a deposit, depending on your credit. And then there’s the actual cost to move. From boxes to renting a U-Haul or hiring a moving company, it all costs money. Call and get quotes so you can get a rough idea as to how much you’ll need to set aside.
- Set aside money to decorate – moving into a home and immediately being house poor is not a great feeling. Want a quick way to completely suck the joy out of your new purchase? This is it! So, plan to have more money than you expect set aside to take care of the furniture and décor you’d like to purchase to decorate your home. If by chance, you don’t spend everything you set aside, I’m sure you can find something else to do with it. You can put your extra into savings or donate to your local Habitat for Humanity.
- Leave room for margin – things will come up when owning a home. And even when you purchase a new or newer home, appliances and systems are bound to fail at some point. Even in new homes with reputable builders, things can happen that aren’t even quality related. Just this year, we had to replace our 5-year-old garage door opener due to wear. And replace the motherboard on our HVAC system due to a lightening strike. During the middle of the summer in Georgia heat. Having room left in our margin allowed us to handle repairs that cost a lot of money. Saving up for maintenance expenses is a smart move.
- Consider increasing your down payment – of course, the more you put down, the less you pay per month. Following the Dave Ramsey method, which I highly recommend, you will put down at least 20% down on a 15-year mortgage. But some buyers are managing to save more. So, if putting more down won’t interfere with your emergency savings, then do it. You’ll appreciate a low note every month when your mortgage isn’t taking up as much room in your budget.
Want to make sure you don’t lose focus when saving for a down payment on your new home? This easy to use Down Payment Savings Tracker will help you keep your savings goal top of mind with an easy to see reminder of how much progress you’ve made!
Budgeting Tips for First Time Home Buyers
We just covered what every buyer needs to know about home inspections. First, I shared the top things every buy should know about home inspections. Then we went over home inspection tips. Now, the next step is to download this handy and free Down Payment Savings Tracker that you can download today.
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- 16 Super Creative Ways to Save for a Down Payment on Your Home
- Moving Into a New Home
- What Do I Need to Do Before Buying My First Home?
- Top 18 Tips for First Time Home Buyers
- 10 Things You Shouldn’t Do When Buying Your First Home
- How Much House Can I Afford? Dave Ramsey Style
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