This is a collaborative post written by Cindy Trello.
Everyone knows that saving for a home takes quite a bit of time. There are many costs that need to be factored in, such as buying new furniture or paying for a removal truck. So when saving up for a deposit, you need to take these other costs into account. This will affect your overall budget, so it’s good to get a full list of costs before you start house hunting. Below are the biggest costs you’ll need to consider before getting to work on purchasing and decorating your dream home.
1. Mortgage
Deciding how much you should spend on a house can be difficult. For this reason, it’s best to listen to experts. They recommend spending no more than 28% of your monthly income on mortgage payments
If you have managed to save up enough, then you can pay some of your mortgage from your savings and therefore buy a more expensive property. Just ensure that no more than a third of your income is going towards a mortgage. This way, you’ll have enough for bills and other costs, with some savings leftover.
2. Homeowners Insurance
Insurance is probably more important than you think. Many homeowners are spending money each month on insurance, only to find their whole home destroyed, costing them more than the insurance can cover. To determine how much you should be paying, divide the value of your home by 1000 and multiply this number by $3.50.
Home insurance prices vary depending on the state you live in; for instance, home insurance in New Jersey is significantly cheaper than in Florida. Take into account how much it would take to rebuild a house in your area and how likely it is for your home to be destroyed. You can save money by moving to a cheaper area.
3. Closing Costs
Finally, you need to take into account closing costs when purchasing a new home. These costs include fees for agents and loans as well as government taxes. That’s anything which is over and above the full cost of the property. In general, this will amount to around 2-5% of a property’s value. This might not sound like much, but it could be difference between a house you can afford and a house you cannot.
Purchasing your own home can have enormous benefits, but it is a complicated process. On top of the total house price, there are additional costs to take into account. These can quickly add up, so make sure you factor them in when raising the finances to buy a new home.
