Seamless home buying means budgeting right: The Best Home Buying Budgeting Tool (for Boston)
Dear Home Buyer,
We regularly ask ourselves, why can’t home buyers search and filter for homes by monthly cost to own vs. the home's asking price? After all, isn't that how people can budget what it means to own their home?
We’ve been deeply interested in helping home buyers understand if a property they would like to buy is within their means. If you can’t afford it, why go any further, right? While it may be up to a buyer’s lender to give some of this insight, given the right tools, buyers can make their own assessment fairly quickly. If it’s a Sunday night and you’re deep in love with a property, why not make your own judgment? After all, it’s pretty easy math.
Homebuyers understand and digest the monthly cost to own a home better than just looking at a home’s asking or sticker price. We’ve noticed renters especially appreciate this perspective. How much will it cost to own this home? After I budget that in, with my income, how much money do I save per month to put towards fun trips, family expenses, or savings? These are the questions buyers want to answer early on and get right.
So, we’ve made a budget calculator with some great guidance. Check it out! Use it and feel free to compare properties side by side. Copy it. Duplicate it. Share it. Make it your own!
A further understanding of the types of home expenses to budget in and understand:
When applying for a residential mortgage you will pay a monthly mortgage amount which will include paying back part of your principal loan and interest on that principal which the lender or bank provided you. There are varying types of mortgages, but the most common are the following:
30 Year Fixed: A mortgage product in which the interest rate is fixed for the 30-year life of the loan.
7/1 ARM: A mortgage product in which the interest rate is fixed for the first 7 years of the loan and after that the interest rate can adjust up and down based on parameters set in the loan and market interest rates at the start of the 8th year.
Both of these loans are amortized over 30 years, which makes your monthly mortgage payment manageable. If you make less than a 20% downpayment on your home purchase, you will also have private mortgage insurance (PMI) to pay in addition to your mortgage.
As of 2014, but indicative of current tax rates by Massachusetts town or city:
Your property taxes
Your city or town, who is tougher than the IRS, requires you to pay property taxes in order to own your property. These funds are put towards schools, maintenance, staff, and updates to local amenities such as parks and shareable spaces.
While it is voted on every year, some cities such as Boston, Somerville, and Cambridge provide a residential exemption to owners of property that live in property vs. rent the property out to others. On average, these cities provide an annual $2,300 break on your expected annual taxes. That’s money saved! If you intend to own and live in the property you can factor this into your calculation.
Your home insurance
Home insurance provides you coverage if you have significant damage in your home. This is essential to consider.
Your HOA fees (only applicable for a condominium)
Homeowners association fees cover a condominium complexes’ shared expenses such as master insurance, landscaping, sometimes shared heat expenses, hallway electric expenses, and shared water expenses if each unit does not have its own water meter. While owning a condominium has its benefits it also has its shared expenses.
Similar to when you rent an apartment, you may have monthly expenses such as:
Heating expenses, commonly gas or oil
As our preferred home inspector may say, “your home is a living organism”. While many homes can be purchased move-in ready, you should always include a budget for on-going maintenance and plan for future projects. You can budget a reserve for high ticket items such as your roof and heating system which have long life spans, but are costly to replace or repair as a one-time expense.
Budgeting the right way will provide a more seamless home buying experience.
At Nuhom, we continue to investigate the pain points our home buyers feel. We find that with every home of interest, home buyers ask us, how much does it cost to own this home?
So intuitively, we ask ourselves, what if you could see home listings by monthly carrying cost as the headliner vs. list price? Would that view help you? What if you could filter by this view? Please comment below!
Nuhom will always provide the right guidance so you understand what you can afford before moving ahead with an offer. We are there at every step so you have a great home buying experience.