Expenses First Time Home Buyers Need to Save For

Major Expenses to Prepare for When Buying Your First Home

When buying your first home, you need to understand and prepare for various expenses. Some expenses must be handled before searching for a property or finalizing the sale. Here are five major expenses that first-time home buyers should start saving for before reaching the closing table.

Down Payment

The down payment is usually the largest expense for first-time home buyers. If using a conventional mortgage, expect to pay between 3% and 20% of the purchase price. If you cannot save the full 20%, consider low or no down payment options. FHA loans, USDA loans, and VA loans offer alternative options if you meet their eligibility criteria. If you work remotely, ensure your income supports your down payment savings goals.

Closing Costs

When you close on your home, you will face additional expenses known as closing costs. These costs include legal and processing fees, detailed in your Closing Disclosure document. You will likely pay for appraisal fees, title insurance, and legal fees. Closing costs generally range from 3% to 6% of the loan’s value, depending on the transaction’s complexity. Consider how remote work might affect your financial planning for these costs.

Home Repairs and Upkeep

As a homeowner, you must handle all maintenance and repairs once you sign the closing documents. Unlike renting, you now cover repair costs directly. Having an emergency fund helps cover unexpected repairs without going into debt. If you work from home, consider setting up and maintaining a dedicated workspace as part of your budget.

Furnishing Your Home

When moving into a larger home, you might want to buy new furniture and décor. Saving for these expenses makes furnishing your home affordable and enjoyable. If your new home lacks appliances or needs upgrades, factor these costs into your budget. For remote workers, investing in ergonomic and functional home office furniture should be a priority.

Homeowners’ Association Dues

If your new home is in a homeowners’ or property owners’ association (HOA), you will pay monthly dues and possible special assessments. These dues can range from $100 to $500, depending on your area and the amenities provided. In high-cost-of-living areas, HOA dues might match the mortgage payment itself. Include these costs in your financial planning, especially if your remote work income varies.

Preparing for these homeownership expenses is essential for managing your finances effectively. By saving before you purchase your home, you’ll handle both expected and unexpected financial demands smoothly. Proper budgeting and planning ensure a smooth transition to homeownership, regardless of your income sources or work situation.