Being a homeowner on a budget is nothing to be ashamed of, if anything, most people prefer to keep their expenses low, especially after recently purchasing a home! But,there are some things you shouldn’t cheap out on, and we’ve got you covered.
The post 5 Things You Should Pay Premium for as a Homeowner or Renter appeared first on Homes.com.
Looking to buy a home soon? There will be upfront costs of buying a house.
You may have found a house that you like. You may have been approved for a mortgage loan, and have your down payment ready to make an offer. If you think that, at that point, all of the hard work is over, well think again.
In addition to the down payment, which can be significant depending on the price of the property, there are plenty of upfront costs of buying a home. As a first time home buyer, this may come to you as a surprise. So, be ready to have enough cash to cover these costs. In no particular order, here are 8 common upfront costs of buying a house.
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What is an upfront cost?
An upfront cost, as the name suggests and in terms of buying a house, is out of pocket money that you pay after you have made an offer on a property. They are also referred to as closing costs and cover fees such as inspection fees, taxes, appraisal, mortgage lender fees, etc. As a home buyer, these upfront costs should not come to you as a surprise.
If your down payment is less than 20% of the home purchase price, then your mortgage lender will charge you a PMI (private mortgage insurance). A PMI is an extra fee to your monthly mortgage payment that really protects the lender in case you default on your loan. Again, depending on the size of the loan, a PMI can be significant. So if you know you won’t have 20% or more down payment, be ready pay an extra fee in addition to your monthly mortgage payments.
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Upfront cost #2: inspection costs.
Before you finalize on a house, it’s always a good idea to inspect the house for defects. In fact, in some states, it is mandatory. Lenders will simply not offer you a mortgage loan unless they see an inspection report. Even if it is not mandatory in your state, it’s always a good idea to inspect the home. The inspection cost is well worth any potential defects or damages you might encounter.
Inspection fee can cost you anywhere from $300-$500. And it is usually paid during the inspection. So consider this upfront cost into your budget.
Upfront cost # 3: loan application fees.
Some lenders may charge you a fee for applying for/processing a loan. This fee typically covers things like credit check for your credit score or appraisal.
Upfront cost # 4: repair costs.
Unless the house is perfect from the very first time you occupy it, you will need to do some repair. Depending on the condition of the house, repair or renovating costs can be quite significant. So consider saving up some money to cover some of these costs.
Upfront cost # 5: moving costs.
Depending on how far you’re moving and/or how much stuff you have, you may be up for some moving costs. Moving costs may include utilities connections, cleaning, moving
Upfront cost # 6: Appraisal costs.
Appraisal costs can be anywhere from $300-$500. Again that range depends on the location and price of the house. You usually pay that upfront cost after the inspection or before closing.
Upfront cost # 7: Earnest Money Costs
After you reach a mutual acceptance for the home, in some states, you may be required to pay an earnest money deposit. This upfront costs is usually 1% to 3% of the home purchase price. The amount you pay in earnest money, however, will be subtracted from your closing costs.
Upfront cost # 8: Home Associations Dues
If you’re buying a condo, you may have to pay homeowners association dues. Homeowners association dues cover operation and maintenance fees. And you will pay one month’s dues upfront at closing.
In conclusion, when it comes to buying a house, there are several upfront costs you will need to consider. Above are some of the most common upfront costs of buying a house.
Click here to compare mortgage rates through LendingTree. Itâs completely FREE.
MORE ARTICLES ON BUYING A HOUSE:
10 First Time Home Buyer Mistakes to Avoid
How Much House Can I afford
5 Signs Youâre Better Off Renting
7 Signs Youâre Ready to Buy a House
How to Save for a House
Not All Mortgage Lenders Are Created Equally
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The post 8 Upfront Costs of Buying a House appeared first on GrowthRapidly.
Setting up a budget is challenging. Doing it forces you to face your spending habits and then work to change them.
But when you decide to make a budget, it means youâre serious about your money. Maybe you even have some financial goals in mind.
The end result will bring you peace of mind. But if youâre creating a budget for the first time, remember that budgets will vary by individual and family. Itâs important to set up a budget thatâs a fit for YOU.
Budgeting for Beginners in 5 Painless Steps
Follow these basic steps and tailor them to your needs to create a monthly budget that will set you up for financial success.
Step 1: Set a Financial Goal
First thingâs first: Why do you want a budget?
Your reason will be your anchor and incentive as you create a budget, and it will help you stick to it.
Set a short-term or long-term goal. It can be to pay off debts like student loans, credit cards or a mortgage, or to save for retirement, an emergency fund, a new car, a home down payment or a vacation.
For example, creating a budget is a must for many people trying to buy their first home. But it shouldnât stop there. Once youâve bought a home, keep sticking to a budget in order to pay off debt and give yourself some wiggle room for unexpected expenses.
Once one goal is complete, you can move on to another and personalize your budget to fit whatever your needs are.
Step 2: Log Your Income, Expenses and Savings
Youâll want to use a Microsoft Excel spreadsheet or another budget template to track all of your monthly expenses and spending. List out each expense line by line. This list is the foundation for your monthly budget.
Tally Your Monthly Income
Review your pay stubs and determine how much money you and anyone else in your household take home every month. Include any passive income, rental income, child support payments or side gigs.
If your income varies, estimate as best as you can, or use the average of your income for the past three months.
Make a List of Your Mandatory Monthly Expenses
Rent or mortgage payment.
Living expenses like utilities (electric, gas and water bills), internet and phone.
Car payment and transportation costs.
Insurance (car, life, health).
Debt repayments for things like credit cards, student loans, medical debt, etc.
Anything that will result in a late fee for not paying goes in this category.
List Non-Essential Monthly and Irregular Expenses
Non-essential expenses include entertainment, coffee, subscription and streaming services, memberships, cable TV, gifts, dining out and miscellaneous items.
Donât forget to account for expenses you donât incur every month, such as annual fees, taxes, car registration, oil changes and one-time charges. Add them to the month in which they usually occur OR tally up all of your irregular expenses for the year and divide by 12 so you can work them into your monthly budget.
Review all of your bank account statements for the past 12 months to make sure you donât miss periodic expenses like quarterly insurance premiums.
Donât Forget Your Savings
Be sure to include a line item for savings in your monthly budget. Use it for those short- or long-term savings goals, building up an emergency fund or investments.
Figure out how much you can afford â no matter how big or small. If you get direct deposit, saving can be simplified with an automated paycheck deduction. Something as little as $10 a week adds up to over $500 in a year.
Step 3: Adjust Your Expenses to Match Your Income
Now, what does your monthly budget look like so far?
Are you living within your income, or spending more money than you make? Either way, itâs time to make some adjustments to meet your goals.
How to Cut Your Expenses
If you are overspending each month, donât panic. This is a great opportunity to evaluate areas to save money now that you have itemized your spending. Truthfully, this is the exact reason you created a budget!
Here are some ways you can save money each month:
Cut optional outings like happy hours and eating out. Even cutting a $4 daily purchase on weekdays will add up to over $1,000 a year.
Consider pulling the plug on cable TV or a subscription service. The average cost of cable is $1,284 a year, so if you cut the cord and switch to a streaming service, you could save at least $50 a month.
Fine-tune your grocery bill and practice meal prepping. Youâll save money by planning and prepping recipes for the week that use many of the same ingredients. Use the circulars to see whatâs on sale, and plan your meals around those sales.
Make homemade gifts for family and friends. Special occasions and holidays happen constantly and can get expensive. Honing in on thoughtful and homemade gifts like framed pictures, magnets and ornaments costs more time and less money.
Consolidate credit cards or transfer high-interest balances. You can consolidate multiple credit card payments into one and lower the amount of interest youâre paying every month by applying for a debt consolidation loan or by taking advantage of a 0% balance-transfer credit card offer. The sooner you pay off that principal balance, the sooner youâll be out of debt.
Refinance loans. Refinancing your mortgage, student loan or car loan can lower your interest rates and cut your monthly payments. You could save significantly if youâve improved your credit since you got the original loan.
Get a new quote for car insurance to lower monthly payments. Use a free online service to shop around for new quotes based on your needs. A $20 savings every month is $20 that can go toward savings or debt repayments.
Start small and see how big of a wave it makes.
Oh, and donât forget to remind yourself of your financial goal when youâre craving Starbucks at 3 p.m. But remember that itâs OK to treat yourself â occasionally.
What to Do With Your Extra Cash
If you have money left over after paying for your monthly expenses, prioritize building an emergency fund if you donât have one.
Having an emergency fund is often what makes it possible to stick to a budget. Because when an unexpected expense crops up, like a broken appliance or a big car repair, you wonât have to borrow money to cover it.
When you do dip into that emergency fund, immediately start building it up again.
Otherwise, you can use any extra money outside your expenses to reach your financial goals.
Here are four questions to ask yourself before dipping into your emergency fund..
Step 4: Choose a Budgeting Method
You have your income, expenses and spending spelled out in a monthly budget, but how do you act on it? Trying out a budgeting method helps manage your money and accommodates your lifestyle.
Living on a budget doesnât mean you canât have fun or splurges, and fortunately many budgeting methods account for those things. Here are a few to consider:
The Envelope System is a cash-based budgeting system that works well for overspenders. It curbs excess spending on debit and credit cards because youâre forced to withdraw cash and place it into pre-labeled envelopes for your variable expenses (like groceries and clothing) instead of pulling out that plastic.Â
The 50/20/30 Method is for those with more financial flexibility and who can pay all their bills with 50% of their income. You apply 50% of your income to living expenses, 20% toward savings and/or debt reduction, and 30% to personal spending (vacations, coffee, entertainment). This way, you can have fun and save at the same time. Because your basic needs can only account for 50% of your income, itâs typically not a good fit for those living paycheck to paycheck.
The 60/20/20 Budget uses the same concept as the 50/20/30, except you apply 60% of your income to living expenses, 20% toward savings and/or debt reduction, and 20% to personal spending. Itâs a good fit for fans of the 50/20/30 Method who need to devote more of their incomes to living costs.
The Zero-Based Budget makes you account for all of your income. You budget for your expenses and bills, and then assign any extra money toward your goals. The strict system is good for people trying to pay off debt as fast as possible. Itâs also beneficial for those living to paycheck to paycheck.
Another money management option is to use a budgeting app. Apps can help you organize and access your personal finances on the go and can alert you of finance charges, late fees and bill payment due dates. Many also offer free credit score monitoring.
FROM THE BUDGETING FORUM
Starting a budget
A reminder NOT to spend.
Grocery Shopping – How far away is your usual store?
See more in Budgeting or ask a money question
Step 5: Follow Through
Budgeting becomes super easy once you get in the groove, but you canât set it and forget it. You should review your budget monthly to monitor your expenses and spending and adjust accordingly. Review checking and savings account statements for any irregularities even if you set bills to autopay.
Even if your income increases, try to prioritize saving the extra money. That will help you avoid lifestyle inflation, which happens when your spending increases as your income rises.
The thrill of being debt-free or finally having enough money to travel might even inspire you to seek out other financial opportunities or advice. For example, if youâre looking for professional help, set up a consultation with a certified financial planner who can assist you with long-term goals like retirement and savings plans.
Related: How to Budget: The Ultimate Guide
Stephanie Bolling is a former staff writer at The Penny Hoarder.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Join bloggers Amanda and Corey Hendrix as their family embarks on a new homebuying journey. From previously living in older homes that require plenty of love (and renovations), they’re looking at opening up their option into new build territory.
Think two seasoned certified financial planners would have an easy time buying a house? Tony and Barbara Matheson would beg to differ.
In fall 2019, these empty nesters found themselves itching to downsize from their large rental in the ultraexpensive San Francisco Bay Area. Hoping to buy a reasonably priced house within walking distance of restaurants and other amenities, they set their sights on Sacramento, CA. Armed with a healthy income, solid credit history, and a deep knowledge of personal financesâplus they’d owned property beforeâthey figured they would sail through the home-buying process.
Six months and three lost bidding wars later, they realized that Sacramento’s real estate market was far more cutthroat than they’d imagined.
In March, the Mathesons finally purchased a three-bedroom, one-bathroom 1926 Tudor on a tree-lined street. With the closing papers signed, they figured they were home-freeâbut COVID-19 was about to throw another curveball into the picture.
Here Tony shares their story,Â and his hard-won lessons for aspiring first-time home buyers and others who want to learn what buying real estate is really like today.
Location: Sacramento, CA House specs: 1,225 square feet, 3 bedrooms, 3 bathrooms List price: $550,000 Price paid: $580,000
Why did you decide to move?
Weâd been living in the Bay Area and were looking to downsize since both of our kids had moved out. We wanted to be near downtown Sacramento, close to restaurants, bars, museums, and coffee shops.
I’d think home buying would be a breeze for two finance pros. How did it go?
I was really surprised by how tough the market was. After five months touring homes, we made an offer on our first house. This house went into a bidding war; we had to raise our bid five times before tapping out.
Next, we fell in love with a second home. This time, we offered the sellers $30,000 over the asking price. The sellers had so many other bids, they never even bothered to counter our offer.
We found a third home, and once again bid over the asking price. But after five tries, we lost out again. It was heartbreaking.
How awful! Why do you think these homes sold to other buyers?
We came prepared with what most consider strong financials for making an offer on a single-family home: great credit scores, a significant down payment, pre-approval for a mortgage. We offered good earnest money and 15-day escrow, didn’t include an appraisal contingency, and probably had a few other bonuses to the seller that I’ve forgotten. So we were doing everything “right.”
What we were finding is that we were up against some other buyers who were making all-cash offers, sometimes $50,000 above the asking price. How does anyone compete with that?
So how did you finally get an offer accepted?
We were extremely fortunate that we had a great real estate agent who was able to find a home that hadn’t been listed yet. We could negotiate one on one with the seller without having to compete against multiple offers.
The sellers had planned to invest $30,000 to $40,000 on home improvements before putting it on the market. We offered to buy the house as is, without the improvements. After going back and forth a few times, the sellers took our offer. Â
What did you like about this house?
We knew within 5 seconds of walking into the house that this was the one. It was the perfect neighborhood. We were close to everything, within walking distance to plenty of bars and restaurants. The outdoor area is gorgeous. Beautiful trees surround our house, and the house is the perfect size for us.
So once your offer was accepted, what happened next?
The sellers werenât prepared to move immediately. They needed time to prepare. So we rented the house back to the sellers for a month after closing. We closed on Valentine’s Day, but we didnât move in until mid-March.
Little did we know what was about to happen.
March is when the coronavirus really hit. What was it like moving during that time?
It was difficult and terrifying in the beginning. We moved in ourselves without hiring movers. Then, after we moved in, it was quite an adjustment. Simple things like calling an electrician or completing other minor home projects were enormously difficult.
Did you make any renovations to your home?
We put $10,000 to $12,000 into the house so far. The major issue after moving in was electricityâit needed to be completely reconfigured. For example, the second bedroom, which became my office, only had two plugs. Between my monitors for work, computers, Peloton, cellphones, and other devices, I needed 12 plugs. We also wanted to put in a tankless water heater for more space, and install a security system. Â
How did quarantine affect these repairs?
It was horrible. We couldnât get anyone to come out to do any work for at least three months. For the first month, no one was booking. Then, when we could finally get through, the businesses were overwhelmed with requests.
What was it like when you finally settled in?
It was exhilarating, exciting, and weird. Exhilarating because we got the house we wanted. Exciting because we were beginning a new phase in our lives. And weird because we moved in at the beginning of the pandemic. We wanted to have a housewarming party, but of course, we couldn’t.
What is your advice for aspiring home buyers?
Even if your finances are completely buttoned up, be prepared that buying a house may be a difficult and even painful process.
Emotionally it does get hard. As much as you try not to get attached to a house during the negotiation process, you can’t help it. And there is a competitive drive that kicks in when you are in a bidding war with others. It’s draining.
Still, in the end,Â knowing that you’ve overcome challenges along the way just makes you more appreciative of the reward at the end. We have a place to call home amidst all this craziness. It’s all worth it.
The post Why 2 Finance Experts Still Struggled To Buy This House appeared first on Real Estate News & Insights | realtor.comÂ®.
In French, it means superior force. However, in legalese, the term force majeureÂ refers to a clause that can allow a person or business to extricate themselves from a contract.
âIn general, itâs a force outside the control of a party,â says Denver, CO, contracts attorney Susan Goodman. âWhat the force majeure clause says is: If there’s an act of force majeure, then performance is excused if the performance is affected by that act.â
In even plainer English, it means: If something completely unpredictable occurs, a contract may be voided.
The current pandemic certainly seems to fit the bill, and will have contract holders invoking force majeure for relief from creditors.
However, mortgage holders looking for a way out of their debt obligations are likely to be out of luck when it comes to following the path of force majeure. Here’s how force majeure works in a contract.
What is an act of force majeure?
Contracts with a force majeure clause often list (very) specific potential calamities. If any of those calamities come to pass, a contracted party is allowed to back out of the deal with no penalty.
Force majeure events often written into contracts include:
“Acts of God,” which often include severe weather, floods, earthquakes, hurricanes, fires, etc.
Acts of war
Acts of terrorism
Acts of government authorities
Strikes or labor disputes
An inability to secure materials
Other causes beyond the reasonable control of a party
Do all contracts have force majeure clauses?
Force majeure clauses are almost always written into business-to-business contracts.
However, personal mortgages usually do not contain force majeure clauses. Neither do apartment leases or contracts for home improvements.
Commercial leases and development projects often do, and those clauses may be invoked due to COVID-19.
âYou’re seeing a lot of activity on the on the [commercial] leasing front now with the argument of force majeure,â says Jack Fersko, co-chair of the real estate department at the law firm Greenbaum, Rowe, Smith, & Davis LLP in New Jersey and co-chair of the American Bar Associationâs real estate section committee.
Businesses “can’t use the spaceâwhether it is because of the virus, which has closed operations down, or [because of local] government orders.”
Construction firms might also invoke the clause if they’re unable to meet deadlines or milestones on a development project. Adding to the confusion is that each state has different requirements for force majeure clauses, which means there’s no one-size-fits-all option.
Invoking a force majeure clause
By definition, an act of force majeure must prevent one or both parties from performing a service listed in the contract.
But economic hardship is not a reason to invoke force majeure.
âAnybody can always claim economic hardship. If your company goes into bankruptcy, that doesnât void a contract, and you canât get out of it by force majeure,â says Goodman.
As always, the key for consumers is: Be aware of all terms in any contract.
Courts around the country are already investigating COVID-19 and how it might relate to force majeure.
âI think it’s important to point out that this is such a unique situation. We’re already hearing that courts are treating things differently than one might expectâlike not calling this an act of God,â Goodman says.
Fersko adds that there isn’t much legal precedent for the current crisis.
âI guess weâll look to fall back to the early 1900s with the flu. Weâll look to other events in history that may be akin to this, and see what sort of case law evolved from that,â he says.
âIn many respects, this being a worldwide pandemic, itâs certainly going to create some novel legal issues.â
Future contracts are likely to include allowance for pandemics
âForce majeure clauses are all written differently,â Goodman explains. She adds that she has seen some clauses with the word “epidemic,” but none with the word “pandemic.”
That will change, of course, after the coronavirus outbreak.
âMost force majeures after 9/11 added terrorism to the clauses. It was never in it before, because nobody really thought of itâbecause it wasnât really part of our society,â Goodman says.
âI think pandemics and epidemics are going to be added to every force majeure clause. Attorneys are already advising their clients to do that.â
The key to a force majeure event is its unpredictability. However, if an unfortunate event or disaster was something that you could and should have prepared for, it’s nearly impossible to invoke the clause.
The post What Is a Force Majeure Clause, and What Does It Mean for Mortgages? appeared first on Real Estate News & Insights | realtor.comÂ®.
Along with the excitement of purchasing a new home, comes the additional costs that you will be expected to pay as a homeowner. Apart from covering the mortgage of your home, you’ll have additional expenses – such as home insurance – that you will be expected to cover. If you’re looking to budget for a home purchase, it’s important that you consider these costs as they can add up to thousands of dollars each year.
To help you make educated decisions when budgeting, we’ve compiled a list of the major home ownership costs in one free, downloadable guide. Get the Home Ownership Costs to Consider guide here.
Home insurance policies help protect against serious damage and destruction, like fires, leaks, floods, or break-ins. It also protects a homeowner from personal liability. Some banks may offer home insurance products, although you can typically purchase a home insurance policy through a home insurance agent or broker.
Tip: You may get better rates if you use a broker or agent. It’s also important to keep in mind that policies typically renew on an annual basis.
The cost of maintenance fees should be taken into account when you’re buying a condo. This recurring cost is in addition to your mortgage and impacts how much home you can afford.
Your mandatory monthly fee will vary by your building and square footage. It typically covers:
Utilities (such as water and garbage collection)
Maintenance of common areas (such as the gym, pool, front desk, hallways, landscaping)
Building reserve fund (covers emergencies and long-term maintenance projects such as a new roof or elevators repairs)
What Are Status Certificates?
If you’re looking to purchase a condo, you’ll want to look into obtaining a status certificate so that you have as much information about the building and your unit as possible before buying. A status certificate provides valuable information about the condo corporation and its financial
situation. It includes details on the budget, legal issues, the reserve fund, maintenance fees, and any fee increases expected in the future.
Tip: You’ll want to carefully review your status certificate with your lawyer before making a purchase.
Property taxes are paid annually by homeowners to their municipality. These taxes are ongoing and are separate from your mortgage. Your annual property tax can often be paid in installments.
Tip: It’s important to remember that this cost is not due at closing, but is a recurring cost.
How Are Property Taxes Calculated?
Your property tax rate will vary depending on the value of your property as assessed by your provincial assessment authority. This is then multiplied by a rate that falls between 0.5% to 2.5%.
How Do You Pay Property Taxes?
You can pay your property taxes either through your mortgage provider or directly to your municipality.
Your Utility Bills
When you purchase a home, you’ll have to set up or transfer your utility bills to your new home. If you live in a condo, these costs may be included in your monthly maintenance fee. Your utility bill will include:
Water and Garbage
Internet, Phone, Cable
For the full details on the home buyer’s journey including examples, advice, pictures and sample calculations, download a copy of our free Home Ownership Costs to Consider Guide here.
The post A Guide To Everything You Need To Know About Home Ownership Costs [Free Download] appeared first on Zoocasa Blog.