When buying a home, it's important to factor in all the associated costs as you set your home budget—not just for the initial purchase, but also for commonly forgotten post-purchase expenses. Follow these steps and consider variable expenses like insurance, taxes, utilities, homeowners association (HOA) fees and appliances to get the best possible picture of what to expect.
1. Review your monthly income and expenses
To start figuring out your new home budget, calculate your household's monthly income first. Then, list your current monthly expenses: utilities, car payments, insurance, groceries, credit card payments, student loans and any other bills you pay regularly.
Pro tip: Check your bank statements to figure out how much you're spending on optional expenses, like new clothes and going out to eat. This will help you see exactly where each dollar is going and if there's room for adjustments.
2. Determine the down payment
The down payment likely will be your biggest upfront cost, and on many conventional loans it can be 20 percent of the total cost of the home. For a $150,000 home, that's a down payment of $30,000.
However, not all down payments are as high as 20 percent, and some loans may not require a down payment at all. BB&T offers several loan options that have low down payments and can work with you to determine which best suits your needs. Factors like the type of loan you're getting and your credit profile also affect your down payment requirements. When you find the right home, BB&T can help you figure out what your down payment should be for the loan you choose.
Typically, your down payment would come from cash you've saved. So if you're not already there, calculate how long it'll take you to save for your down payment. Put that money somewhere safe and accessible!
Pro tip: There may be programs in your state to help make home ownership more affordable. Read about qualifying for down payment assistance.
3. Figure out the monthly costs
These include everything from your mortgage payments to paying for yard work. Start with BB&T's mortgage payment calculator, which provides insight on how much you'll need to pay monthly for your mortgage and taxes, in addition to closing costs at the time of purchase. Closing costs can include fees for the appraisal, lender, home title, escrow and interest.
While mortgage payments and your utilities will likely be your biggest monthly expenses, you need to leave room in your home budget for potential costs like HOA fees and general maintenance. For example, if your new home has a yard, are you going to pay someone to maintain it? How old are the heating and air systems? Consider setting aside at least 1 percent of your home's value each year for maintenance costs—for a $150,000 home, that's $1,500 per year, or $125 per month.
Pro tip: Your monthly insurance costs will likely change, too, especially if you're moving from renters insurance to homeowners insurance. Depending on your loan, you may also need private mortgage insurance.
4. Account for any upfront expenses
Other than your down payment and closing costs, potential expenses that you can incur up front include:
- Lawn and garden equipment
- Moving expenses
- Unexpected repairs
Pro tip: Ask for and review a copy of your final closing costs well before the settlement, so you don't experience "sticker shock" when signing the papers. You'll receive your final closing disclosure at least three business days prior to closing. Be sure to review all costs and speak with your BB&T mortgage loan professional if you have any questions.
Keep it up. You're getting smarter about home buying.
How Much Home Can You Afford? (Video)
Consider all of the costs that go into buying a home so that you can make a good decision about your home purchase price.
How Much Will My Mortgage Payments Be? (Calculator)
Find out how much your monthly fixed-rate mortgage payments will be based on loan amount, interest rate and loan term.
Where to Find Down Payment Assistance (Article)
When you don't have much for a down payment, down payment assistance options can help you get into a home.
For comparison purposes, a 30-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 3.977% with 0.250 discount points and a $985 origination fee with a credit score of 740 would result in 360 equal payments of $940.47. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/5/19. Rates and programs may change at any time.
For comparison purposes, a 15-year fixed rate mortgage of $200,000 with a 20% down payment at an APR of 3.430% with 0.250 discount points and a $985 origination fee with a credit score of 740 would result 180 equal payments of $1,405.34. This payment does not include tax or insurance costs—the total payment obligation may be higher. This is a representative example based upon rates that were effective as of 12/5/19. Rates and programs may change at any time.
Rates and pricing may vary and are subject to change at any time without notice.
Loans, lines of credit and credit cards are subject to credit approval.
All BB&T mortgage professionals are registered on the Nationwide Mortgage Licensing System & Registry (NMLS), which promotes uniformity and transparency throughout the residential real estate industry. Search the NMLS Registry.
Consumer Handbook on Adjustable-Rate Mortgages coming soon.
Truist Bank, Member FDIC and an Equal Housing Lender.
New York City residents: Translation or other language access services may be available. When calling our office regarding collection activity, if you speak a language other than English and need verbal translation services, be sure to inform the representative. A description and translation of commonly-used debt collection terms is available in multiple languages at www.nyc.gov/dca.
Branch Banking and Trust Company is now Truist Bank. Learn more.
BB&T and SunTrust have merged to become Truist. Both institutions will continue to offer independent product lines for a period of time. This may include differing underwriting guidelines, product features, terms, fees and pricing. Our friendly teammates at your local SunTrust branches will be happy to walk you through their respective products. You can also learn more by contacting them at 800-SUNTRUST or SunTrust.com.