Comparing a home’s list price to your budget is a great place to begin when house hunting, but it’s only one factor to consider. Follow these three tips so that you’re accounting for all of the costs of buying a home.
1. Get started with an online calculator
A mortgage calculator can provide a helpful gut check on what your monthly payments might be. When using these online tools, be sure to fill in more than just the home's list price—fill in fields for things like property taxes and homeowners insurance to get a more complete picture of what your monthly payment could be.
Consider this: Two homes may have the same listing price, but one might have high property taxes that put it out of reach. A calculator can help you figure out how that could affect your monthly payment.
2. Review your pre-approval letter
A pre-approval letter helps you know what you’re qualified for ahead of time, but does not give you a complete picture of your monthly payments. Review your letter closely to see how additional costs such as private mortgage insurance (PMI), property taxes, homeowner’s insurance and HOA fees could impact your budget.
3. Plan ahead for home maintenance
When building your home budget, a good habit is to set aside funds for regular maintenance and repairs. One popular rule of thumb is to set aside 1% of the home's purchase price for repairs. So for a $300,000 home, you'd set aside $3,000 annually. If you have an older home, you may need to boost this budget even more. Divide this into monthly installments to make sure you’re prepared for these extra costs.
The bottom line: Feel confident in your budget and consider all costs before you start looking at homes.