When you're a first-time homebuyer, there are a lot of things to think about. From budgets to making a list of everything you want in a new home, it's hard to keep everything in mind for a smooth home buying process.
Some expenses can come as a shock if you're unprepared for them. So what are the top three costs that many first-time buyers aren't prepared for? Check out these insights from the Texas United Mortgage group and our team of mortgage lenders.
Did you know that when a seller accepts your offer, you have to give them some money as a “deposit” that you are entering into a contract? This is called earnest money (or "good faith" money).
Sellers expect this deposit as a sign of good faith that you plan to go through the full contracting and purchasing process to close on the house. In most cases, buyers should plan to put aside 1-2% of the home's purchase price as earnest money that will be due immediately upon the seller's acceptance of an offer.
To make your good faith payment, you'll need a cashier's check, personal check, or wire transfer. Most sellers and their agents won't accept a credit card payment. In addition, after receiving the payment, sellers take the house off the market—also a sign of good faith that they won't accept another offer while you work through the purchasing process.
So what happens after you deliver the earnest money? In most cases, the money is held in an escrow account until closing. Then the funds are applied to closing costs and fees to finalize the purchase.
However, you lose the earnest money if you back out of the contract or don't complete the sale.
It's no secret that moving is expensive. However, many first-time buyers don't factor in those costs when budgeting for their new home purchase.
In addition to hiring movers, you'll need to budget for packing supplies, transportation, and any temporary housing you might need while your belongings are in transit. If you have friends or family with a truck who can help move your things, be sure to factor in their time and gas expenses as well.
The average cost of hiring movers ranges from $1,250 for a local move to nearly $5,000 for a distance of 1,000 miles to your new house, depending on the size of your move. So when planning your homeownership budget, be sure to estimate accurately for the cost of moving into your first home!
When you're a renter, any unexpected repairs that need to be made are the responsibility of your landlord—including the costs for those repairs. However, if something goes wrong with your new home's plumbing, roof, or electrical system, you're on the hook for the costs.
Many first-time buyers forget to budget for emergency repairs, which quickly adds up. While you hope to move into your home and not experience any significant issues before the "new" wears off, homebuyers never know when something can go wrong.
Be sure to have at least 1% of the home's purchase price set aside for unexpected expenses like this. It's not uncommon for new homeowners to experience plumbing problems, a broken garage door, or other issues when getting to know a new home.
It's also essential to maintain a reserve budget long-term for home repairs and maintenance. If you make it through the first year of living in your new home without spending that money you set aside "just in case," avoid spending it! You never know when you'll need a new fence, roof repair, or other repairs to keep your home in good condition long-term.
Planning for your first home is no easy task! While it's an exciting milestone to achieve, it takes plenty of time, a well-thought-out budget, a good credit score, and the right insights to make the dream of homeownership come true.
When planning your financing, work with an expert mortgage lender and make sure your budget includes the percent down you plan to apply to qualify for the best conventional loan options. The best mortgage companies Texas offers can help you explore different types of mortgages and minimum down payment options, including an FHA loan, VA loans, or USDA loans, to reduce monthly payments to fit your budget.
If you feel unprepared for any of the costs we mentioned today, it's not too late to start setting money aside to cover your earnest money, moving costs, and potential repairs for your new home. We've put together a free worksheet that helps first-time buyers work through potential costs and create a budget for a better homeownership experience!
Download a free copy of our "The Definitive Home Buying Cost Worksheet," and reach out to our team to learn more about the best financing options. As one of the best mortgage companies Texas offers, we specialize in helping first-time homebuyers qualify for the right mortgage loans and incentives when purchasing a house.
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