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How to Budget for Buying a New Home

May 24, 2023
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There’s much more to buying one of the homes in Ridgefield WA than just the asking price. Down payments, closing costs, HOA fees, and the general costs related to homeownership, all add up. This is why it’s important to understand all of the costs involved when determining the budget for your new home. Fortunately, purchasing a brand new home, rather than an older home, will help save you money early on thanks to newer appliances, home systems, and overall warranty to give you time to recoup some of your savings and gain equity in your home.

As you start the process of budgeting for your new home, the first step to take is to check your credit. Your credit score impacts the kind of loan you can qualify for, and if you qualify at all. Fortunately, there are multiple options, so even if your score isn’t great, you may still be able to apply for an FHA loan or other option. The better your credit score, the better the mortgage rate you’re likely to get.

You also need to make an effort to have a solid downpayment on a home. The more you can put down, the smaller your payments will be. Ideally, you should  put 20% down, but that is often more than many people can afford. Most lenders require at least 3% or more, but you will be required to take out mortgage insurance, which you will have to pay until you have accrued 20% of your home’s equity through your monthly payments.

It’s also important to consider the closing costs, which can come as an expensive surprise. Closing costs range from 3-5% of your loan amount and must be paid at the official closing. That means a home loan of $200,000 may require up to $10,000 in closing costs, separate from your downpayment. This is something else to consider when budgeting for your new home. The closing costs are a combination of various fees, including application fees, attorney fees, home inspection, and appraisal fees.

One of the benefits of purchasing a new home is that you’re less likely to have any major repairs or upgrades that need to be done, but keep in mind the costs you may face down the line once the home has aged and warranties have expired. You will need to factor in general upkeep and maintenance, even with a brand new home.

Don’t forget to include any other external fees, which can include car payments, student loans, healthcare, childcare and more. All of these monthly and annual costs impact the amount of home you can afford.

Once you have a solid budget in mind, then you can discuss mortgage pre-approval with various lenders to find the mortgage and rates that are best for you and your financial situation. Then you get to start the fun part: choosing one of the ideal new homes in Ridgefield WA. Contact us to help you find and create a home in your budget that you’ll enjoy for years to come.

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This post was written by Pacific Lifestyle Homes

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