Buying a home is an exciting process. To prevent this time from becoming overwhelming and stressful, make sure you and your budget are prepared.
Check out the following budgetary tips from Dave Ramsey, important for both novice and experienced homebuyers alike:
#1 Eliminate debt and establish an emergency fund.
Especially if you are a first-time home buyer, the cost of buying and maintaining a home can feel intimidating. For this reason, be sure you are prepared.
Before buying your home, pay off your debt and be sure that your emergency fund provides you with enough security for both expected and unexpected upkeep needs. It’s recommended for homeowners to maintain an emergency fund that is three to six months deep.
#2 Factor in all costs to determine how much you can afford.
To do so, you will need to calculate your monthly take-home pay versus monthly home costs. If you figure that 25% (at a maximum) of your monthly budget will be set aside for home costs, you can calculate this price based on your mortgage rate.
Don’t forget to factor property taxes and monthly insurance payments into this budget to know how much you can afford.
In addition to the sticker price of the home, other costs that must be considered and factored into your overall budget may include (but are not limited to):
- Closing costs (typically about 3-4% of your home’s purchase price)
- Remodeling needs
- Moving costs
- Monthly HOA fees