How to Start Budgeting for a New Home

Budgeting for a new home is essential if you plan to do it in the new year. In this post by Riva Title Company in South Miami, we’ll cover the essential information you need to start your journey toward home ownership. 

What You Need to Know to Start

When creating a home-buying budget, you might find many suggestions online of what you should include and what it should look like. Still, it’s important to remember that each budget will look different for every family or individual. Remembering the 28% rule can help guide you through the process.

What’s the 28% rule?

The 28% rule states that your housing expenses shouldn’t exceed 28% of your monthly income to keep your finances healthy. This includes debt, mortgage payments, property taxes, and homeowner’s insurance. When budgeting, remember that this 28% will help you stay within your means and avoid financial strain when budgeting.

Budgeting is the first step if you’re planning on buying a home. Next is to get an excellent home-buying team. For everything title-related, call Riva Title Company, Inc. at 786-787-7888, and one of their agents will answer any questions you may have.

Sit Down and Crunch the Numbers

While starting the home-buying process can be exciting, it can become overwhelming if you haven’t crunched the numbers and seen how much you can afford. Not having a budget can leave you navigating blindly through the real estate market. Creating a budget can help you decide what kind of home you can afford without breaking the bank and putting your finances at risk. The other advantage of creating a home-buying budget is that it will set a spending cap for you when deciding on a mortgage. Sometimes, lenders might try to offer you a larger mortgage than you can afford. In this case, if you didn’t have a budget, you might fall for a bad deal for your finances in the long run. Having a budget will keep you grounded and allow you to choose the right mortgage to keep your finances healthy.

Save for a Downpayment

A downpayment is an amount you’ll need to put down for a large purchase like a house or a car. This payment is usually made in cash and, in the case of real estate, should be at least 20% of the total cost of the property. When budgeting for a new home, it’s essential to consider the downpayment, as this will primarily affect your mortgage payments. If you put down a large downpayment, your monthly payments on your mortgage will be lower, making it easier to pay month to month. A larger down payment will also help you pay your property quicker, increasing your investment return.

Riva Title Company, Inc. can help you make the home buying experience smoother with their experienced title agents. Call them today at 786-787-7888 and learn how they can help you get title insurance to protect your real estate investment.

Consider your Mortgage Payment

Another critical component of your home-buying budget is your mortgage payment. This will be a recurring payment for as long as your mortgage lasts, and it’s vital to include it to avoid late fees or, worst case, a foreclosure process, usually 120 days after defaulting on your mortgage. Also, when accepting your mortgage terms, ensure you stay within budget to avoid straining your finances.

Include Closing Costs

Closing costs are also an essential element when budgeting for a new home. While you won’t know exactly what closing costs will look like, you can calculate it at 2% to 5% of your total purchase price. All closing costs should be disclosed to buyers before closing, so keeping an eye out for these fees before signing any paperwork is essential. Also, remember that these costs aren’t set in stone and can be negotiated.

Have a Rainy Day Fund

Lastly, having a rainy day fund is vital for any homeowner in case of unexpected repairs, especially for one buying a new property. Having your potential property inspected before closing can help you catch any issues beforehand and decide if you want to use them as leverage for negotiation or if you want to tackle the repairs yourself. Either way, you’ll need funds to do so. Another scenario is that while you might have the property inspected before closing, some issues might pop up once you move in and start living there. That’s why it’s a good idea to be prepared beforehand, and it’s great to be able to tackle these issues head-on.

We hope this post is helpful in budgeting for a new home. If you have any title-related questions, don’t hesitate to call Riva Title Company, Inc. at 786-787-7888 today!