Saving for Your First Home
If you're saving for your dream home, there are several things to consider when figuring out your financial responsibilities. Buying a new house requires several steps and typically includes upfront payments that go beyond your first home mortgage bill. Find out more about saving for your first home with Generations Bank, based in the Finger Lakes and Western New York.
Breaking Down the Cost of New Home
When you buy a home, start by tallying up all the costs associated with your purchase. There are many payments to consider, and some come into play at different times. These additional costs may include:
The down payment for your home is the part of the purchase price you'll need to deliver upfront. This amount directly affects the amount you'll need to borrow from your lender. While the specific dollar amount will vary depending on the type of loan you have, it's typical for homebuyers to plan to put about 10% down. For reference, here is how your mortgage may impact this dollar amount:
- FHA loan: Appealing to many first-time homebuyers, this type of loan typically has lower down payment requirements.
- Conventional loan: The specific amount you'll be required to pay upfront depends on the lender and loan type. This could range from 3% to 20% or more.
- Government loans: Backed by the U.S. government, loans like USDA and VA often require no down payment from qualified homebuyers.
Due when you finalize your loan, closing costs are typically made up of processing fees associated with buying the house. It's typical for them to range between 3% and 6% of your principal loan value. These fees may include those that apply to the following:
- Credit checks
- Title insurance
In certain cases, seller concessions may minimize these fees. Plus, no-closing-cost mortgages are available to help ease this responsibility.
Homeowner's Insurance and Property Taxes
While many mortgage lenders incrementally lump your homeowner's insurance and property taxes into each monthly payment, some do not. If they are included, this money is collected and saved in an escrow account and your lender will pay these expenses for you when they're due.
Is your new home in a community with a Homeowner's Association (HOA)? Will you need new appliances or more furniture? Planning for these miscellaneous expenses can help you feel more prepared when you close on your new home.
Start Saving and Talk to a Lender
After calculating a savings goal for your new house, it's time to start budgeting. One big thing you can do is calculate what your monthly payment might be for your mortgage and try paying it routinely now. This can help build up your savings and help you find out where you need to make some meaningful financial changes. Other tips include:
- Evaluate current expenses: Pinpoint which expenses are necessary and which ones can go.
- Pay off debt: Budgeting for your new house includes making sure you can pay your mortgage each month without breaking the bank. Paying off some debt now can make things easier later.
- Set automatic transfers: Every little bit helps. With money from each paycheck automatically going toward your goal, you can build up your savings without even thinking about it.
- Take advantage of extra income: Did you just get a holiday bonus from work or a generous birthday gift from your aunt? Consider putting these additions directly into your account.
Find More Expert Advice
While you're saving, consider talking to your local lender. At Generations Bank, we offer several first home mortgage options and many ways our customers can streamline everyday financial tasks. Contact us to learn more or visit one of our offices in the Finger Lakes and Western New York area today.
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