What to Think About When Budgeting for a New Home

One of the first things you need to do when you decide to become a homeowner is to set up a budget. These are some of the things you need to consider when making your calculations.

Before You Start Searching for a House You Need to Set Your Budget

There are plenty of things you need to consider when you’re buying a house. How big you want it to be, how many rooms it needs to have, and what neighborhood you want to live in are only some of them. But before you set out to begin your search for a home, you need to set out a budget. Only after you establish how much you can afford can you start your search for the right house to fit your needs. The people at Advanced Title Company want you to find your perfect home and make the process easier for you, which is why they bring you this list of things you need to consider into your budget.

Follow the Twenty-Five Percent Rule

Your home payments shouldn’t be higher than 25 percent of your monthly income. You don’t want to be stuck paying more than what you can afford. You’d be surprised at how many times aspiring homeowners make this mortgage mistake. Remember that you won’t only be making monthly mortgage payments, but you will also need to have money for your daily expenses, and save some up for emergencies and retirement. You need to calculate your monthly income and expenses and calculate how much of it can go into your mortgage. You should also evaluate your debt to income ratio and start reducing it.

Practice Making “House Payments”

The term ‘payment shock’ is used in the real estate industry to describe the experience renters receive when they switch from paying a low rent to a high mortgage. You can help avoid getting this shock by practicing making house payments for at least six months before you buy a house. This way you’ll be used to high payments when you need to pay your mortgage. You can start writing two monthly “rent” checks that add up to the total amount of what your mortgage payments will be. One check will go towards your actual rent and the other to a special savings account. You’ll be practicing and saving money.

Work on Your Credit Score

Your mortgage loan greatly depends on how strong your credit score is, which is why you need to work on raising it. A better score can give you more affordable mortgage rate and get you even closer to your dream home. To improve your credit score, you need to start by paying off as much of your debt as you possibly can. You should reduce your balances to less than 30 percent of your credit limit. You should also avoid making any major purchases until after your loan goes through and you get the house. You should know that mortgage lenders have several requirements. You’ll probably be required to provide a title insurance policy for the house you want. The lender needs to have insurance that their investment is safe. You can call Advanced Title Company at (970) 255-7677 to learn more about title insurance and request a policy.

Consider Your Monthly Extras

Renters and homeowners don’t have the same expenses. As a renter, if something goes wrong with your home, you can call the landlord to fix it. You don’t have that luxury as a homeowner. Your renting contract probably includes utilities or some amenities that you never even think about. As a homeowner, utilities, amenities, and other expenses are all on you. Major home systems and appliances need maintenance every certain amount of time, as will your garden (if your new house has one). You should budget that in as well.

Down Payment

You should also consider the down payment, which is not included in your mortgage loan. This payment comes straight from your wallet. How much are you willing to pay as a down payment? It could make all the difference in getting your dream home.

Moving Expenses

The actual process of moving into a new home is not free either. You need to set aside some money to pay for a moving company, to rent a truck, or to pay for your friends’ fuel expenses (if they’re helping you move).

Look for a Real Estate Agent

Some people think that hiring a real estate agent is not necessary, but if this is your first venture into real estate, you will need an agent’s help. A realtor will help you get a better deal and guide you through the process. You need to consider the realtor’s commission when you’re planning your budget.

Remember to Get Your Title Insurance in TARGET

Don’t forget to consider there are various types of insurances you need as a homeowner when you’re setting up your budget, getting title insurance should be on that list. The title insurance process is quite simple, and it all starts by calling to Advanced Title Company at (970) 255-7677.