The decision to purchase a home, whether it is your first or your tenth, is one which you need to prepare for. It is important to take all the necessary steps to ensure the transaction takes place. In addition to the initial purchase and mortgage you acquire, there can be other costs that come up along the way, which you need to be ready for. Here are some savings tips so you can be prepared for your home buying process and homeownership to go as smoothly as possible so that you can enjoy your new residence.
Home Repair Savings
As soon as you move into your house, the interior, its appliances, and the home exterior will continue aging and will need to receive repairs or be replaced eventually. The interior flooring of your home may be made of carpeting, hardwood flooring, vinyl, or linoleum, each of which has its own life expectancy. After some time, they will need replacement or repairs, especially if they become damaged early on. Your home's roof may likely be made of asphalt shingles, which usually only last for approximately 25 years.
Each of these replacement costs can add up and if you are not prepared financially you might end up having to pay for the repairs on credit or putting them off, which can result in further damage taking place. So, for example, if your roof needs replacement and you cannot replace it, the attic and home interior may become water damaged from leaks. Put some money into a savings account each month to help save up for when your house needs repairs and replacements.
Another cost that many new homeowners may not prepare for is private mortgage insurance (PMI). This cost is charged by the mortgage company and is added onto your mortgage payment when your mortgage loan exceeds 80 percent of your property's value.
Private mortgage insurance is more common in today's mortgage market because there are many more financing programs available that do not require you to pay a 20 percent down payment. These mortgage programs provide a benefit to you because you don't have to save for years for your down payment. Depending on your mortgage loan amount, your private mortgage insurance can cost several hundred dollars per year. Talk to your mortgage broker about how much you can expect on your home loan so you can make sure to account for it into your new home budget.
When looking at homes for sale, be sure to consider the current state of the home you might purchase to keep your extra costs low.