5 Ways to Make Your Home Buying Budget Work

Buying a house is probably one of the biggest purchases you’ll make in your lifetime. So, you want to make sure you do it right. These tips can help you know what you can afford, so you get a home that doesn’t leave you “house poor.”

One of the expenses you’ll face when you’re budgeting to buy a home is insurance. Farm Bureau can help you make sure you have the coverage that’s right for your new home. Find an agent who can get you the protection you need. 

Figure Out How Much House You Can Afford

The mortgage you’re approved for may be higher than the mortgage you can afford. A common guideline is that you should spend:

• 28% or less of your gross income on housing-related costs and
• 36% or less of your gross income on debt, which may include auto and student loans and credit card debt along with your mortgage

Add Up Your Housing-Related Costs

When you’re considering what mortgage you can afford, keep in mind that your mortgage isn’t the only cost of home ownership. You’ll also need to factor in these expenses.

Mortgage Insurance

If your down payment is less than 20% of the value of your home, you may need to pay for private mortgage insurance (PMI). The amount you need to pay varies based on the cost of the home you’re buying and your credit score. 

Homeowners Insurance

You’ll need coverage to protect your investment. If you’ve been renting and paying for renters insurance, or you owned a less-expensive home, this expense may go up.

Utilities

Factor in the costs of electricity, gas, water, sewer, trash removal and phone/internet access to your home buying budget. Your real estate agent should be able to estimate these costs for you or get the costs from the home’s sellers.

Maintenance Costs

The costs of home maintenance vary based on how old your home is and the condition it’s in. Many experts recommend saving 1% of your home’s value per year for maintenance and upkeep. So, if you’re buying a house that costs $350,000, you should save $3,500 per year.

But, if you know you’ll have a big expense in the near future, like a new roof, replacement windows or a heating and cooling system, you’ll need to factor that into your budget. The 1% rule may not be enough.

Homeowners Association Fees

Some houses are part of a homeowners association (HOA), and when you buy that house, you’re agreeing to pay the HOA fees. This cost usually covers upkeep and maintenance for common areas, like parks and playgrounds, and may also pay for things like lawn care, outside maintenance and social events.

These fees can go up over time, so it’s a good idea to find out what triggers increases and how much and how often they can rise.  

Turn to Farm Bureau to Protect Your Investment

Your home and possessions need coverage against damage and destruction. Make sure you have the protection you need. Reach out to Farm Bureau today for advice and recommendations.