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You may have heard owning your home can be an entirely different challenge than renting. Savvy consumers know that the journey to homeownership begins with discipline and careful budgeting to buy a home so you can save up to achieve your personal financial and homeowning goals. Whether you have a 20% down payment in your savings account ready to go, or you are looking for tips to help kickstart your homebuying journey, it’s a good idea to learn a little more about the real costs of homeownership and purchasing a brand new home.


Stay Smart About Common Recurring Costs for Home Buyers and Home Owners

Some new homeowners are caught off guard when they close on their home purchase and find that they are obligated to pay monthly costs that they have never heard of. For example, monthly private mortgage insurance is common among conventional loans with down payments less than 20%, and may represent an extra monthly premium on top of regular monthly costs such as your monthly mortgage principal & interest payment, your taxes and homeowner’s insurance premiums (whether you escrow or pay directly), and monthly bills not tied to real estate that you are still responsible for as the homeowner, like new utilities for your new home. Some homes may also have additional monthly costs like Homeowners Association (HOA) or maintenance fees.

Don’t be a homeowner who gets caught unaware – when you are budgeting to buy a home, you can stay informed about the numbers that affect you by consulting your loan estimate. This is a document your lender must issue you, which breaks down the costs associated with your home loan so you know how much cash you need to have on hand when it comes time to close.


Don’t Forget to Budget for One-Time Homebuying Costs

Home loans exist to serve a wide variety of customers, and for that reason you may be unsure exactly what one-time homebuying costs you need to plan for when budgeting to purchase a home. Depending on the type of loan (conventional vs. government-backed), the largest one-time cost you may have to pay when it comes time to purchase a home is your down payment. The size of your down payment – or whether you need to put one down at all – may vary from home lender to home lender, or from home loan to home loan.

Other one-time costs for the purchase of a home that you will want to take note of when home budgeting include the cost of a third-party home appraisal (if the lender requires the home be appraised), but don’t forget the fees associated with looking up and recording the title and deed for your new home, or fees charged by your lender such as an application fee or discount points. All of these should be considered when it comes time for you and your family to start budgeting to buy a new home.

For a breakdown of the amount of cash you will need to close on your home, you may again consult your loan estimate. In the current standardized version of the loan estimate, the bottom of the first page has a section which typically reads “Costs at Closing.” These costs are generally broken out in more detail on the second page of the loan estimate, and can be your best resource for determining what the real costs of your home mortgage will be.


Reconcile with Your Current Budget

Now that you have a sense of your monthly costs, compare them to your monthly budget. Consider the number that could be your new monthly mortgage payment (normally represented on your loan estimate page 1 under “Projected Payments”) and compare it to your existing rent or mortgage payment. Do you still have enough left over to meet your other recurring costs, like childcare, food, and outstanding debt payments?


Resources for Prospective Homebuyers

Thinking about purchasing a new primary residence, second home or investment property? Whatever your intended use for the home, utilize a mortgage calculator tool to run ownership scenarios and get a sense of your buying power before you turn to Zillow® or call the realtor down the street. An informed buyer is an empowered buyer, so after you are finished home budgeting you should take the time to review more resources, such as those for prospective veteran borrowers looking to explore their VA home loan options, or debt consolidation lending options for those consumers looking to get their credit card or student debt under control.

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.

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