Can I Really Afford to Buy a Home?

Buying a home can actually be more affordable than you may think, especially for first-time homebuyers.  There are numerous lending and government programs available that are designed to help first-time homebuyers attain home ownership. These programs usually help with down payment assistance, meaning that the amount of cash you will need to have saved up can be reduced. Another beneficial option is to finance your loan through the lender your builder is affiliated with. Builders and lenders often create working relationships that make their processes smoother and more efficient for all the parties involved in the transaction process.  This increased efficiency allows builders and lenders to offer financial incentives to their buyers to assist with closing costs.

Even with the benefit of down payment assistance programs, it is a good idea to prepare for some out-of-pocket expenses to be included in your closing.  The average fees buyers can expect for closing should be between 2-5% of your sales price.  That may sound like a lot but here are some financial items that work in the buyer’s favor on a purchase:

Real estate agent commissions are commonly paid by the seller.  So, even if you are working with an agent to help you find your new home you should not expect to pay that agent directly or at closing. 

Your first mortgage payment must be at least 30 days after your closing date.  Mortgage payments are typically due on the first day of each month.  That means you should have anywhere between 30-60 days before you are required to make your first payment depending on the date you close on your new home.

One of the biggest differences between renting and buying is the cost of home maintenance.  As a new homeowner, you no longer have the convenience of calling the rental office or landlord when a pipe springs a leak or the paint on the walls need a touch up.  Home maintenance is now your responsibility as a homeowner.  Of course, if you purchase a newly constructed home, the likelihood of expensive maintenance is greatly reduced.  You should expect quality in the construction of your new home.  It is important to know that builders typically offer warranties, and you will want to be sure to fully understand the details of the warranty on your new home.  There are also independent home warranty companies that offer inexpensive coverage for systems and appliances.  These are most affordable when purchased at the time of acquiring ownership, so you should investigate your needs prior to closing.

Finally, remember that your monthly payment will now include taxes and insurance in addition to your loan payment.  If your property is in an HOA, you will most likely have HOA dues that should be considered in your budget. 

This can all sound a bit overwhelming, but it isn’t so bad when you get a clear picture of what your expenses will be.  You should take time to sit down and calculate your loan payment (principal and interest), property taxes, homeowners’ insurance, and HOA dues to figure out how much you should budget each month.