Thinking about buying your first home? It’s no surprise that many factors come into play when it comes to preparing for the overall cost of this landmark event. Knowing what to expect can help you to better budget and prepare for making your homeownership dreams come true. In my experience, here are a few things to consider.
One-Time Costs to Buy Your First Home
One of the largest one-time costs of buying your first home is going to be—no shock here—your down payment This is usually up to 20% of the overall cost of the home, but the good news is that there are many programs for first-time homebuyers that make it possible to buy a home with as little as 3% down.
In addition, there will be closing costs and lender fees of around 2 to 5%. These can include but are not limited to home inspections, appraisals, prorated property taxes, real estate attorney fees, title searches, and insurance. And let’s not forget to add in those moving expenses.
Typical Payment Examples For a Starter Home in the Metro:
So let’s give an example for a $300,000 home, the typical mortgage payment on this home at a 5.25% interest rate would be $1325. Adding in taxes and insurance would bring the up to about $1725 per month.
For the same $300,000 home with 10% down, the typical principal and interest payment would be $1490 plus taxes and insurance of about $500. Additionally, when buying a house with less than 20% down, your lender will require you to pay a property mortgage insurance fee (PMI), which would be about $70 per month, bringing the total mortgage payment to $2060.
Whereas, if you went to the bare minimum of 3% down on a $300,000 house, the principal and interest payment would be about $1607, plus $500 for taxes and insurance, and the PMI would be about $138 per month, bringing this total mortgage payment at $2245.
Here’s a table showing the difference that your down payment makes on your monthly mortgage payment:
| Percentage down | Principal + Interest | Taxes + Property Insurance | Mortgage Insurance | Total Payment |
| 20% down | $1325 | $500 | $0 | $1825 |
| 10% down | $1490 | $500 | $70 | $2060 |
| 3% down | $1607 | $500 | $138 | $2245 |
*These figures assume a credit rating of 750.
As you can see, there’s a quick escalation in your total monthly payment due to not only the greater loan amount but the additional mortgage insurance required for a loan with less than 20% down.
Ongoing Homeowner Expenses
For the most part, your mortgage payment will be the biggest expense you will have in your lifetime. But along with your mortgage payment, you will be responsible for property taxes, homeowners’ insurance, mortgage insurance, monthly utilities, maintenance expenses, and, in some cases, homeowner association fees. Also, if you are able, it makes good sense to start funding an emergency fund for any unexpected costs. Yeah. . . the costs add up quickly. But if you plan wisely, it will be money well spent.
Buy Your First Home with Ease
Sound scary? There will definitely be times during the home-buying process that you’ll be nervous. . . but buying a home is also very exciting and definitely worth the leap of faith it requires! Call us at Calumet Properties to help you through this process. We will help to ease the stress of reaching your goal of homeownership. We love working with first-time homebuyers and will be happy to walk you through the process. We’ll be with you every step of the way as you make moving into your dream home a reality!