Buying a home is a big financial decision, so it's important to have a solid budget in place. Here are some tips on how to set yourself up for success when budgeting for a new home:
Know your monthly income and expenses
The first step is to figure out how much money you have coming in each month and how much money you're spending each month. This will give you a good idea of how much you can afford to spend on a mortgage. This is information you will need to provide to get preapproved for a loan, so it’s a good idea to know where you’re at beforehand.
Determine your down payment
The down payment is the amount of money you'll pay upfront for your home. The larger the payment you put down, the lower your monthly mortgage payment will be. For another way to keep your monthly payment lower, check out our blog explaining what a 2/1 Rate Buydown is!
Keep in mind closing costs
Your down payment is not the only money you have to pay upfront, you will also have closing costs that will need to be paid when you close on your new home. Closing costs are set in place to cover the real estate transaction itself and pay for things such as processing the loan, appraisals, your title, title insurance, agent fees and more. These will account for roughly 2-5% of the home’s value, so keep that in mind when budgeting for your down payment.
Determine the home you can afford
Once you know your down payment and monthly income, you can start to determine how much home you can afford. A good rule of thumb is to spend no more than 28% of your gross monthly income on housing costs. This ensures that you can comfortably afford to live in the house you purchase without breaking the bank, and leaving room for any unexpected costs. This leads us to our last tip!
Leave room in your budget for home maintenance
Even if you buy a new home, you'll still need to budget for home maintenance costs. This includes things like repairs, renovations, and property taxes. Whether you are buying a new construction home or a pre-built house, a building goes through a lot of changes throughout the year as the temperature fluctuates, weather changes and local policies are updated. Many of these changes are minor and just require annual attention. However, if you notice something that is under your New Home Warranty, you can submit it to Quality Builder's Warranty to have this fixed so long as it falls within your warranty period.
It’s important to remember that this is a completely normal part of homeownership. Whether you choose to do it yourself or hire contractors to take care of your home maintenance chores, it’s smart to have that built into your budget!
Additional tip when building with Chesapeake Homes
One of the best assets you have when building with Chesapeake Homes is access to our preferred lender, Tidewater Mortgage. Not only does this create a seamless process but they offer many programs and incentives to help ensure you are getting the best deal on your new home.
Buying a home is a big investment, but it can also be a great way to build equity and achieve financial security. By taking the time to budget for a new home, you can make sure that you're making a smart financial decision.
