Before we get to the closing on your home, it’s time to step back, take a deep breath, and practice a little more of that thoughtful reflection. You’re trying to buy a home, not a nightmare. So, let’s just go over a few little details, to make sure that you’re making the right move for your family.
The big question is, “Can you afford your new home?” This isn’t talking about what the mortgage company says, it’s talking about what you say. Do you have enough money on hand to cover your closing costs and down-payment; while still leaving you enough to cover moving expenses and feed your family? Once you’re moved in, are you going to be able to afford to live in that home?
The last thing we want is for you to feel like you’ve bought a millstone around your neck. You’re trying to buy your dream home, not a series of headaches. So, let’s take a moment to check out a few things.
Closing costs
We’ve already talked about the closing costs in section 3. For most first time home-buyers, closing costs come as a complete surprise. The obvious question is, do you have enough money for the closing costs? You won’t be able to buy your home if you don’t, so this is a very important question.
If you don’t have enough money for your closing costs, is there some way you can come up with that money? Don’t take out another loan to pay those closing costs, the mortgage company will ask where that money came from, and if they find out you took out another loan, it could ruin the deal. Is there something you could sell to make up the difference? Is there a family member who will gift you the money you need?
The mortgage escrow
Your monthly mortgage payment doesn’t all go to the mortgage company; or rather, they don’t get to keep it all. About 60% of your monthly payment is your mortgage payment (principal and interest). The rest is placed in an escrow account, to pay for three things:
- Property taxes
- Homeowners insurance
- HUD insurance
The nice thing about this is, you don’t need to worry about making those payments, nor about putting money aside in order to be able to make those payments.
Your other home costs (utilities)
There are other monthly expenses that are going to change for your family, not just your house payment. Before signing you name on the bottom line, it might be a good idea to check these out, and make sure they’ll fit into your budget.
If your new home is bigger, you’d better figure on a higher monthly utility bill; especially for heating and cooling. You can usually find out how much the average monthly bill is going to be by contacting the local utility companies. If that doesn’t work, you can always go ask a neighbor. Find one that has a house about the same size as your new one, and ask them what they pay.
The other major cost that you need to consider is gasoline for your cars. Most families spend much more on gasoline per month than they realize. Is your new home closer or farther from the places you go to regularly? Are you going to end up paying more per month for gasoline than you are now? These things affect your monthly budget.
What work does the home need?
Unless you’re buying a new home, your home will probably need some sort of repairs. Most people have something they just put up with, rather than fix. Whether it’s the broken porch stair that’s propped up with a brick, or the broken window which has been boarded over, your home will probably need a little bit of tender loving care from you.
What is your plan for taking care of those little or not so little repairs? Do you have the money to make those repairs? You know, the longer you wait, the worst it gets. So, have a plan, and make sure it is a workable one.
Lifestyle changes… budget changes
Okay, now that we’ve talked about all the negative things that can be part of buying your home, it’s time to ask yourself if you can really do it. For most people, buying a home means some lifestyle changes. Monthly costs typically go up, while family income remains the same. This usually means some sort of change and may mean some sort of sacrifice. Are those changes things that you can do? Are they realistic? Will they cause problems farther down the road?
Remember, any sacrifice you make will probably be temporary. If you have to give up your membership to the gym, in order to make your house payment, it’s probably worth it. Within a couple of years your income will probably have increased enough that you can afford to go back to the gym.
So, can you afford to buy the home you want to buy? Can you afford the lifestyle changes you need to make? Hopefully, the answer to these questions is yes.
Buying a home can be one of the most exciting events in your life. I want your home buying experience to be an enjoyable one. That’s why I’ve prepared this guide for you. If you have any questions or concerns, be sure to ask me. I’m on your team, and I want you to be a winner.
Eduardo Gonzalez
Realtor Associate | 786.397.2785
