Let's Talk Budget

Whenever a person thinks of buying a home, there is a thought of how much money should be saved for the home purchase. With our clients, we prepare them for this journey by providing steps to become best prepared to discuss their financial position with a lender. Nevertheless, here are some tips that everyone can use to guide them in saving toward homeownership.

1. Credit Check: Obtain a credit report from www.annualcreditreport.com and score from myfico.com. Budget: Free or up to $50 (subject to change).

2. Avoid New Debt: Do Not Open New Credit Lines Before Home Purchase. Budget: Free!

3. Pay Down Debt: Reduce existing debts if necessary to improve credit profile (discuss with lender first). Example: Allocate $500 - $2,000 for debt repayment.

4. Credit Report Correction: Correct inaccuracies on your credit report (discuss with lender first) using DIY Credit Repair Kit. DO NOT CREATE DISPUTES PRIOR TO HOME PURCHASE. Budget: Free to $39.99 (subject to change).

5. Calculate Affordability: Use mortgage calculators to understand what you can afford (i.e., Bankrate's Mortgage Calculator). Budget: Priceless!

6. Contact a Financial Advisor: Seek professional financial advisor toward your goals. Budget: Free to $300 per hour (subject to change depending on the type of advisor and any established relationship with the company).

7. Legal Assistance: Consult with a real estate attorney regarding your homeownership goals (i.e., purchasing in the name of a trust, investing, etc.). Budget: $200 - $500 per hours (depends on the attorney's fees).

8. Create a Budget: Track income and expenses to identify savings opportunities. Budget: Priceless!

9. Automate Savings: Set up automatic transfers to a high yield savings account that is not used for any expenses. Budget: Priceless!

10. Cut Unnecessary Expenses: Reduce spending outside of budget. Budget: Priceless!

11. Save Windfalls: Save bonuses, tax refunds, and other additional funds outside of standard income. Budget: Priceless!

12. Consider Additional Income: Find ways to boost your income within your line of work if possible (i.e., demonstrate qualification for a raise, etc.). Budget: Priceless!

13. Down Payment: Apply for down payment assistance or save up to 20% of the home price to avoid private mortgage insurance (PMI). Example: For a $300,000 home, save $60,000.

14. Closing Costs: Save 2-5% of the home price for closing costs. Example: For a $300,000 home, save $6,000-$15,000.

15. Emergency Fund: Maintain 3-6 months of living expenses. Example: If monthly expenses are $3,000, save $9,000-$18,000.

16. Moving Expenses: Save for moving costs (professional movers, truck rental, etc.). Budget: $1,000-$3,000.

17. Home Inspection: Save for a home inspection. Budget: $300-$500 (varies based on inspector and home's size).

18. Appraisal Fee: Save for an appraisal. Example: Budget $300-$500.

19. Earnest Money Deposit: Save 1-3% of the home price. Example: For a $300,000 home, save $3,000-$9,000.

20. Property Taxes: Save for initial property taxes. Budget: $1,000-$3,000 (varies by home's value and location).

21. Homeowner's Insurance: Save for the first year’s premium. Budget: $1,000-$2,000.

22. Private Mortgage Insurance (PMI): Save for PMI if down payment is less than 20%. Budget: 0.5-1% of loan amount annually (clarify with lender).

23. Hire a Real Estate Agent: Sign a Buyer Brokerage Agreement (BBA) with The Essential Millennial Realtor to receive exceptional services toward your home purchase. Budget: Commission Rate per BBA.

24. Research Home Prices: Meet with The Essential Millennial Realtor to discuss market trends in your price range: Budget: Priceless!

25. Understand Market Trends: Follow the housing market trends to be better prepared to make an offer. Budget: Priceless!

26. Attend Showings and Open Houses: See each property before you make an offer. Budget: Priceless!

27. Understand Mortgage Trends: Complete onboarding review with The Essential Millennial Realtor to understand the home finance process as well as a separate call with the lender's representative to understand specific interest rates, terms, and conditions. Budget: Priceless!

28. Re-evaluate Your Financing Options: While in the due diligence period, make sure your financing aligns with your budget for the subject property (ask your lender if rates have decreased, etc.).

29. Research Mortgage Options: Compare loan fee estimates for each mortgage option before deciding which one is best for you. Budget: Priceless!

30. Get Pre-Approved: Obtain a mortgage pre-approval. Budget: Free to $50 (subject to change and varies by lender).

If you are looking to buy a home, we home you find the information above helpful. We also hope that you will allow Dreams to Keys Realty LLC and The Essential Millennial Realtor to assist you in your homebuying journey.