Real estate agents are often faced with this question from first time home buyers who aren’t sure what to be prepared for: How much does it really cost to buy a house?
When considering what you need to buy a house, it’s important to go over your finances with a fine-toothed comb and understand all of the costs that are going to come up along the way. The more prepared you are, the less you’re going to find unexpected surprises during the process.
So, How Much Money do I Need to Buy a House?
There’s no set answer to this question because everyone is in a different situation. You need to take a look at your income, what you want in a home, and how much money you have saved.
Of course, one of the initial factors you’ll need is your down payment. This differs depending on your budget and the cost of the house you’re looking at.
For example, in Canada, your down payment for a house under $500,000 will be 5%, and for a home over $500,000 it will be 5% for the first $500,000 and 10% for the portion above that.
On top of your down payment, you’ll need to cover closing costs, insurance fees, initial mortgage payments, and any moving costs. You should also have wiggle room incase you need to make repairs during this time.
Using a Mortgage Payment Calculator
A good place to start figuring out your finances is by using a mortgage payment calculator or a home loan calculator. This will give you a good idea of the kind of money you’re looking at and what you’ll need to save to achieve your goals and objectives.
You shouldn’t rely on these tools alone. However, they are a good way to get a sense of what kind of loan you could qualify for. You will still need to meet with a financial advisor to get officially approved for a mortgage.
Make a Home Buying Cost Checklist
Sit down and make a checklist of the costs you’re going to face so you can best be prepared for your financial situation. This will help make sure you’re not facing any surprises along the way.
Here is a list of the things you need to ask yourself to factor in your budget:
- Are you going to need to purchase new furniture or appliances?
- What mortgage have you been approved for?
- How much can you put into a down payment?
- What will your closing costs be?
- Have you considered which insurance packages or rates you will need?
- Do you have an emergency fund set up?
Not sure what to make of all these numbers? Talk to a real estate agent. Some real estate agents have backgrounds in accounting and finances, and have plenty of experience helping other first time home buyers get their finances in order. When it comes to your financial security, don’t take any risks.