Determine Your Budget
Home ownership is expensive which is an obvious fact, but it’s important to understand the various components associated with the cost. When you have a clear concept of what you want in a property, work with a lender to determine what it takes to obtain it. They will partner with you to figure out what you can afford as far as a down payment and monthly mortgage payments. In some cases buyers are ready to move forward and in others buyers find they may need to continue to save or tweak their lifestyle to afford what they want. Maybe it’s small modifications like cutting morning coffee stops and monthly cable bills or perhaps it’s larger adjustments such as selling a car and using public transportation. A buyer will have to determine what they’re willing to sacrifice to achieve their goals.
The down payment and monthly mortgage payments are common expectations amongst buyers however there are many other fees that arise in the process. Depending on agreements made between the buyer and seller, the buyer could be responsible for upfront costs such as repairs, replacements or inspection fees. Just be sure to have a good understanding of what’s expected and always have it in writing.
Once you’re in escrow closing costs will surface. You can discuss these fees with your lender from the beginning so they don’t come as a surprise. A common misconception is that once you close escrow you’re in the clear, but a buyer should account for a sizable reserve. Not only will you be responsible for monthly mortgage payments, but also homeowners’ insurance, property taxes, maintenance and any renovations you might plan to do.
Tracking each of these costs and tallying them all up will define your actual budget, rather than simply considering the price tag of the property alone.