If you’ve never bought a house before, budgeting for such a large purchase may be a little foreign to you. But if you learn how to budget, keeping up with mortgage payments, ongoing expenses, and unexpected costs will be far more manageable. If you are prepared, budget-wise, you can handle the pressure and expenses of home ownership. So let’s see how to create, balance, and stick to a budget when buying a house in Miami.
Budgeting Basics for Buying a House
Many people find the concept of budgeting, especially for buying a house in Miami, more than a little intimidating and restrictive. But it doesn’t have to be that way. Budgeting is basically nothing more than keeping track of money coming in and going out – pretty simple really.
In fact, a budget can provide peace of mind. With a well-planned budget in place, one that you stick to, you won’t have the worry many people do at the end of the month when money runs low and bills are due. You’ll know exactly how much money you have left after paying all the nonnegotiable expenses and bills.
How to Set Up a Budget
The two major components of setting up a budget for buying a house are income and expenses. So the best way to begin creating a budget is by setting up a spreadsheet or two columns on paper to list out your income and all your expenses.
In the “Income” column enter all the money you have coming in each month. This should be all forms of income, including work, child support, investments, and so on. For the expenses, include, of course, your mortgage payment and other recurring expenses such as insurance, HOA fees, and property taxes, as well as unexpected expenses such as those for home repairs and emergencies (typically about 1% of your home’s sale price).
Then in the “Expenses” column list all your non-house-related costs, for example, car payments, auto insurance, groceries, and childcare. After that, include expenses for things that aren’t such essential, things such as Netflix and gym membership.
Having set out all your income and expenses, simply subtract the total expenses from the total income. This will let you know how much money you have left for an emergency fund, savings, and entertainment.
A good rule of thumb to follow, oner recommended by financial experts is the 50/30/20 rule. This rule states that 50% of your income should go toward needs, 30% spent on wants, and 20% on savings and debt payments.
Keep in mind that what you will spend on buying a house and then maintaining it will vary from local market to local market. And you’ll need a good idea of local costs to budget accordingly. Be sure then to consult a Miami agent at 305.771.1710 for assistance in this area.
What we set out above is a broad outline of budgeting for buying a house. Now let’s look at some budgeting specifics, the expenses in particular . . .
- Property taxes and homeowners insurance – These are usually included in your monthly mortgage payments – but not always. In addition, the amount can fluctuate owing to changes in taxes and insurance premiums.
- HOA fees – Be sure to take into account any HOA fees, which can amount to several hundred dollars per month. If you pay annually, you’ll need to set aside some monthly each month to cover the much larger yearly bill.
- Maintenance and upkeep – Buying a house in Miami or anywhere else means that you’ll have ongoing maintenance and upkeep costs. Experts recommend that you set aside 1% to 2% of the value of your home to cover these costs.
- Big emergency projects – If you’re buying a house, you will inevitably face at some point large expenses for emergency projects, typically upgrades and repairs such as a new roof.
- Emergency fund – you will also need to keep working on an emergency fund to cover the major repairs and to carry you through adverse life events like a job loss. Experts recommend an emergency fund large enough to cover 3 to 6 months of living expenses.
- Life insurance – When you have a family and you’re buying a house, life insurance becomes even more important and you may need to purchase more. Ideally, you want a payout large enough to cover the whole mortgage and several years’ living expenses for your family.
- Retirement – As a homeowner, you may need to contribute more to your retirement fund so that you’ll have enough to cover household expenses after you retire.
Get the Agent Advantage
Budgeting for buying a house really is pretty simple, especially on the income end of it. The difficulty lies in knowing about and then factoring in all the expenses involved, both one-off and ongoing. An experienced Miami agent can help figure these expenses in the local market so that you can budget more accurately. When it comes time to buy a house, contact us today at 305.771.1710.