Purchasing a new home requires a great deal of consideration. While the neighborhood, square footage and amenities offered are important, few things are quite as important as budget. When creating a budget for your new home purchase, here are three things you don't want to overlook.
As a new homeowner, you should expect to spend somewhere between 1 and 4 percent of the home's value on maintenance each year. For a home that is worth $250,000, annual maintenance would range between $2,500 and $10,000. To put these figures in greater perspective, the monthly commitment would be between $208 and $833.
For the average family, putting this money aside after meeting all their other obligations might be a significant expense. However, maintenance is a necessary cost in order to maintain your investment. When formulating your budget for your new home make sure you are incorporating your maintenance commitment as well.
When lenders approve applicants, they deal with hard facts; income, car payments, credit card debt, student loans, etc. They don't really delve into the grey area that consist of money you spend going out to dinner, the theater or shopping, but these costs can quickly add up as the average family spends more than $200 a month just eating out.
While a mortgage might seem easily affordable just considering your staple expenses, these minor expenses can quickly push a home out of your comfortable budget zone. Dealing with this factor requires you to either alter your lifestyle to minimize these additional expenses or choose a home that allows you to cover these extra expenses and your mortgage.
Make sure you choose your loan terms wisely. This is especially important when it comes to interest accrual. Traditional loans typically calculate interest as a lump sum, once a month cost. Simple interest loans incur interest on a daily basis, which can work in your favor.
If you want the best chance of paying off your mortgage early, go with a simple interest loan. With this type of loan option, simply paying your loan on time, or even as little as a few days before the payment due date can help you reduce interest accrual, lower the cost of the loan and keep more money in your wallet.
Purchasing a home requires thorough budget planning on your part. Make sure you are taking your time to purchase a home you can easily afford.