Now, what were you thinking? 😎 😋
Well, if you were thinking of a first-timer who falls in love with their first new home, and wonder what will it cost you, then you came to the right place. 👍 😊 If you weren’t thinking this, well we can’t help you. ☹
What makes a virgin homebuyer? Who is a virgin homebuyer? You may be familiar with other associated monikers such as Newbie, 1st-Timer, and First-Time Homebuyer. Whatever the moniker is, it’s definitely someone who has methodically implemented a saving plan to purchase an important investment. As with any investment, there are expenses you need to identify and allocate the appropriate funding to cover them. Many home buying virgins get caught off-guard with what comes along with purchasing that new, pristine home. We’re going to help you uncover those expenses you may not have accounted for.
You already know the standard down payment is 20% of the purchase price. If you can do this, this is a strong positive as you are starting off with a good equity baseline. However, if you don’t have 20% or want to part with all that cash there are other excellent loan programs that are available that may better suit your needs. Of course, these loan programs will take into account credit status and eligibility. Keep in mind, although some of these loan programs help you in achieving the purchase it may come with higher interest rates. This can increase your costs over the course of the loan. If you are hesitant to increase your costs but don’t have the 20% down, you do have the option of scaling to a smaller home you can afford. I highly advise talking with a reputable local lender at no obligation to show you different loan programs that best suit your home buying goals!
PMI stands for Private Mortgage Insurance. PMI is an expense associated with a low down payment or risky loan terms. There is no escaping PMI when such loans are granted due to the high loan risk. The dollar amount is often included in your monthly payments. There are specific times the lender may not include it in the mortgage payment but as an up-front charge. Make sure you ask up-front if this expense will be or not included in your mortgage payment.
There is no escaping this expense as its a requirement. You will need proof of homeowner’s insurance before your home purchase is completed. In some cases, the bank will want a deposit up-front.
A common mistake virgin homebuyer’s make while searching for their new home is not checking the property tax rate. Property tax rates will vary due to the local rate as it’s dependent on schools and fire district levies. In certain instances, you may have to pay the previous homeowner for some portion of the paid fees. Also, what may come along with the property tax are specific neighborhood fees such as homeowner’s association, maintenance, amenities (i.e. pools, landscaping, etc.).
“What’s this?” is commonly asked by many virgin homebuyers. Earnest money is funds placed in escrow to show intent to purchase the home. The amount varies, but generally, it is a 2%-3% percent of the cost of the home. In case you were wondering, it’s NOT a separate expense, as it will be applied to your down payment or closing costs.
Don’t be afraid virgin homebuyers to ask your lender for a list estimated fees that appear during or near closing. These fees can include appraisal, survey, title insurance, home inspection, recording, any points (upfront payment required to lower your interest rate) and sometimes attorney fees. If you would like to see an example of individual closing costs you can view an example published by the CFPB (Consumer Finance Protection Bureau). We can also discuss the option of asking the seller and negotiating closing costs into the purchase of your home. This will alleviate that big out of pocket costs!!
This is a common oversight by virgin homebuyers. Make sure you list all the monthly maintenance cost associated with the upkeep of your new home, as well as any repairs. For example, take into account lawn care, if you are maintaining it yourself the cost of the equipment if you don’t possess it already. Don’t forget about utilities. If you are moving from an apartment into a home, your utility expenses will increase. It’s been estimated a homeowner will spend at least 1-2% of your home’s purchase price in maintenance the first year.
Furnishings & Appliances
Ah yes the fun part, decorating your new home! As with most excited virgin homebuyer’s a new home means go bigger! A new, bigger bed, larger TV, stylish kitchenware, and nicer living room furniture (No more milk crates for an end table!). Of course, this translates to an increase in your credit card payment (unless you pay hard-cold cash) so make sure you factor the increase in your monthly expenditures. When it comes to appliances you want to assess this while you’re viewing homes. Starter homes tend to come with older appliances (not to mention dated decor) that may not be energy efficient which means you’ll have to replace them. Make sure you account for this, as appliances do impact your utility expenses. Don’t want to be shocked during your first month in your new home!
If your friends only want to show up for the inauguration party for your new home, then you’ll need to account for moving expenses. You may need movers, depending on how much you have, and if your friends are willing to help or not. No matter if you need movers or not you’ll need to account for the moving truck, mileage, and gas. If you are moving yourself don’t forget any equipment needed to move your boxes, furniture, etc. Equipment is a separate cost for your moving truck rental. If your friends are going to help you move then don’t forget the pizza and beer cost😁 I recommend a beer 🍻 session to keep your moving buddies productive!
Let’s just get this out of the way…..your monthly expenses will increase with your new home. No more fixed utility expenses included in the rent you pay to your parents nor low utilities (excluding cable!) expenses with a small apartment. Your electrical, gas, water, home security, and cable\TV Internet connection cost will increase. Plus, as we shared above, if you are doing the work yourself for your lawn, and\or any home repairs you will have to account for this.
All of the above may seem overwhelming, but once you prepare and itemize for all the expenses above before making the purchase official, you’ll be in a better position to enjoy the experience of breaking your homebuying virginity. I will walk you through this process as I know it can be like a fire hose of information spraying at you!! All you have to do is either use this contact form or call/text me directly 818-259-0060 and just say, “I’m a virgin homebuyer!”
If you’re a virgin homebuyer and want more informational tips you can learn more here.