(Newswire.net — May 12, 2020) — Is budgeting and saving for down payment possible? Yes, it is.
Saving thousands of dollars as a down payment may seem like a daunting task at first, but when you start budgeting, you will realize it is an attainable goal.
Here are a few considerations when budgeting for a house down payment.
Costs of owning a home
Before you buy a home, you should understand the cost implications that come with any purchase. Let’s review the general expenses to be financially prepared.
Upfront cost
The upfront cost is what you will incur from your pocket or take from your official loan estimate given by your lender.
Notable costs include prepaid charges for interest, insurance premiums, and property taxes. The outset expenditure is part of this cost, too, including moving cost, closing cost, down payment, fees and taxes, and lender charges.
The cost depends on the mortgage lender you choose and how much you want to borrow.
Mortgage payment
Once you buy a home, the lender will require you to start paying towards the principal balance and the interest. You will also pay property tax and homeowner’s insurance premiums.
In some cases, you may have to pay for mortgage insurance.
Unexpected costs and repairs
You will also incur emergency costs and the costs of repairing appliances and other home systems.
Taking a Home warranty plan will save you money in this area.
Maintenance and other costs
Owning a home also comes with recurring utility costs, such as water, electricity, and sewage. As a new homeowner, be ready to pay for dues if you live in an area with a homeowners’ association (HOA), too. You may also incur home maintenance costs that cover cleaning the home, landscaping, yard work, and pest control or eradication.
Ways to budget for new home
You’re probably wondering how you can budget for your dream home. Here are a few tips to help you with the budgeting process:
Step 1 Calculate Income
First, you need to calculate and add up every income you earn every month.
EXAMPLE:
Paycheck 1= $2,000, Paycheck 2 = $3,000,
Total Monthly Income = $5,000
Step 2 Calculate Expenses
Next, write down your monthly expenses and sum the items.
EXAMPLE:
Saving = $400, Utilities = $500, Food = $750, Clothing = $250, Transportation = $450, Medical = $350, Personal = $100, Recreation = $200, Other = $500
Total Non-Housing Expenses = $3,500
Step 3 Income Less Expenses
Subtract non-housing expenses from total income. Then, use the remaining funds on the house down payment. In our example, this would be $1,500 per month.
EXAMPLE:
$5,000 – $3,500 = $1,500
As a rule of thumb, the amount you’re going to put down should be no more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage. You can save money for future spending with the balance, such as furniture upgrades or maintenance costs.
In our example, the income is $5,000:
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Maximum Mortgage Payment = $1,250 (25% of $5000)
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Total Housing Expenses = $1,500
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Amount left for the Maintenance and Repair Fund = $250 per month
From the example above, we have achieved the objective of creating a budget. We have put every dollar into use, so nothing goes to waste. Factor all these costs in your budget planner, too.
Energy-efficient tips to save in your new home
Paying energy bills to energy companies in Dallas constitutes a significant portion of our monthly expenditure. Here are practical and straightforward money saving tips that can help you to tame energy bills as a new home buyer.
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Service your air conditioner. Routine maintenance to your conditioner will go a long way in saving energy. It may entail cleaning or replacing worn-out air filters and can lower energy consumption by 15%.
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Cook outside. Avoid using the indoor oven during warmer seasons.
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Open windows. It will allow the breeze from the outside to naturally cool the area and natural light to illuminate the home. You won’t need to run your HVAC or use artificial light.
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Set the thermostat. During warm days, set the thermostat at a specific temperature if you are not at home. It can slash your energy spending by 10%.
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Install ceiling fans. Fans make the home cool and comfortable, lowering dependence on your HVAC.
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Seal ducts. When the ducts are open, you will find yourself spending more on electricity. Sealing and insulating ducts will lower your bill.
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Install window treatments. Blinds, shades, and film can reduce heat and the cost of cooling your home.
Seal air leaks. You can use caulk, one of the cheapest materials, to seal cracks and openings in your walls. It will prevent heat accumulation on warm days.