When buying your first home, budgeting can seem very intimidating. There are so many expenses to consider and you need to make sure you are aware of them to avoid going over your budget. These expenses not only include the cost of the home, but also the other upfront costs, prepaid items and future expenses.

To get a initial idea of your budget, you can start by simply looking at how much you are currently spending on rent or housing. Lenders often recommend that you look for a home that costs no more than 3-5 times your annual household income.

What are the Expenses When Buying a Home?

Hand down, the biggest expense you’ll have is your down payment. For a $400,000, you’d need at least $12,000 down when using a conventional mortgage – or the equivalent of 3%.

Your down payment is only one of several upfront costs. Other costs you should take into consideration include:

• Closing Costs (1-4% of the purchase price)
• Appraisal Fee
• Moving Costs
• Home Inspection Costs

Once you factor these in, you will also need to budget for:

Monthly Mortgage Payments

• Homeowners Insurance (This is typically part of your mortgage payment)
• Property Taxes (Another prepaid item that is paid at closing)

HOA Fees (If applicable)

Utility Costs