As you approach homeownership, it’s important to understand how your expenses will change. It’s also a good idea to build an emergency savings fund and get used to your new budget before you move in.
Besides the mortgage payment, homeowners have to budget for ongoing costs like home insurance, property taxes and maintenance. This can add up quickly.
- Know what you can afford
There are many costs associated with owning a home. These costs go beyond your monthly mortgage payments and include things like homeowners insurance, property taxes and utilities.
When you are shopping for a new home, it is important to stick to your budget and know what you can afford. This will help you avoid the costly mistakes of buying a home that is too expensive.
A good rule of thumb is to not spend more than 28% of your income on housing expenses.
- Know where your money is going
Keeping track of your expenses is essential. From your monthly mortgage payment to a new water heater, you need to know exactly where all of your money is going each month. Try a budget worksheet like the one from Freddie Mac to get started.
It’s also helpful to create a savings account specifically for home maintenance. Adding money from any bonuses, raises or cash gifts into this fund can help you reach your goals faster. It may even make your house-related bills feel less of a burden.
- Know when to stop spending
Once you’ve established your budget, it’s important to stick with it and be aware of the hidden costs of homeownership. This could mean cutting back on the daily iced coffee or monthly back massage.
To make it easier to stick with your budget, I recommend using a money tracker, such as SoFi Insights. It allows you to link your bank accounts and monitor spending and savings goals. It can also help you identify areas of overspending and help you stay on top of your expenses.
- Don’t get caught in a bidding war
Getting caught in a bidding war can be a nightmare, especially when you’re in a hot market. But with a little preparation, it’s possible to avoid this trap and get the home of your dreams.
Get pre-approved for a mortgage: This will show sellers that you’re a serious buyer and have the financial resources to purchase their property.
Write a personal letter: This can help separate you from other bidders, but be careful not to include any information that might violate fair housing laws.
- Don’t overspend
Purchasing a home is an exciting time, but it doesn’t mean you can spend freely. Many homeowners forget about extra expenses like utilities, lawn care, and HOA fees.
The best way to avoid overspending is by creating a budget. This will help you identify your essential expenses and non-essentials, and it can also teach you how to save money. This will help you stay on track to meet your financial goals.
- Don’t overspend on repairs
Home repairs and maintenance are not just inevitable, they can be expensive. Many experts recommend that homeowners invest in a home warranty. What does a home.warranty cover? Each warranty company offers different coverages so be sure to check what companies offer.
But these costs can vary based on the age and condition of your home. If you’re planning to buy an older home, it may be wiser to aim for a savings goal of 3 to 4 percent each year. You can also save by cutting out unnecessary expenses such as coffee or a daily lunch out.
- Don’t overspend on upgrades
When it comes to building or remodeling your home, it’s important to have a budget. However, unforeseen expenses can still arise, so it’s best to leave some room in your budget for these costs.
It’s also important to be selective about what upgrades you’re making. Choosing custom work or luxury elements can be a surefire way to go over your budget.
These are just a few of the hidden costs homeowners need to be aware of when they’re buying or building a new house. Staying on budget doesn’t have to be impossible if you keep these tips in mind.
- Don’t overspend on furniture
Furnishing a new home can add up quickly, so it’s important to have a budget in place before making any large purchases. Experts recommend setting aside 20% to 30% of the cost of your home for furniture and decorating.
To save on furniture, consider shopping around major sales events like Memorial Day, Fourth of July, and Labor Day. Also, consider looking for deals online or at your local Habitat for Humanity ReStore.
Another way to stay on top of your budget is to use a money tracker app, like SoFi Insights. The app links your bank accounts and helps you track spending, savings, and goals.