Stick to a budget when buying a house in Chicagoland – If you’ve never bought a property before, you might find it difficult to create a budget for such a significant investment. However, managing your mortgage payments, recurring spending, and unforeseen charges will be much easier if you learn how to budget. You can manage the stress and costs of home ownership if your finances are in order. Let’s examine how to set up, balance, and adhere to a budget for home purchases in Chicagoland.
Budgeting Basics for Buying a House
The idea of budgeting, especially for purchasing a home in Chicagoland, can be quite scary and constrictive for many people. However, things don’t have to be that way. Keeping track of money’s arrivals and departures is essentially all there is to budgeting; it’s a relatively straightforward process.
Actually, having a budget might bring you peace of mind. You won’t experience the stress that many individuals do at the end of the month when money runs out and expenses are due if you have a well-planned budget in place and stick to it. After paying all the bills and non-negotiable expenses, you’ll know exactly how much money is left over.
How to Set Up a Budget
Income and spending are the two main factors to consider when creating a budget for a home purchase. Therefore, the best method to start making a budget is to set up a spreadsheet or two columns on paper to list out all of your spending and revenue.
Enter every dollar you receive each month in the “Income” column. All sources of income, such as job, child support, investments, and so forth, should be included in this. Include your mortgage payment, as well as other regular costs like insurance, HOA dues, and property taxes, as well as unforeseen costs like those for home repairs and emergencies (usually around 1% of the sale price of your home).
List all of your expenses, such as car payments, auto insurance, food, and childcare, in the “Expenses” column. Include costs for items that aren’t absolutely necessary after that, such as Netflix and a gym subscription.
Simply deduct the whole of your expenses from your total income after listing all of your income. This will show you how much money you have left over for savings, entertainment, and an emergency fund.
The 50/30/20 guideline is a wise guide to follow and is always advised by financial professionals. According to this guideline, you should spend 50% of your income on necessities, 30% on wants, and 20% on savings and debt repayment.
Remember that the costs associated with purchasing and later keeping a home will vary depending on the local market. Additionally, you’ll need a solid understanding of local expenses so that you can plan your budget appropriately. So make sure to contact a Chicagoland representative at (312) 869-2289 for advice in this regard.
An overview of budgeting for a home purchase is provided above. Let’s now examine some budgeting details, specifically the expenses.
- Property taxes and homeowners insurance – Generally speaking, but not always, these are covered by your monthly mortgage payments. Additionally, because taxes and insurance premiums are subject to change, the amount may alter.
- HOA fees – Remember to include in any HOA costs, which can go into the several hundred dollar range each month. If you want to pay annually, you’ll need to budget some money each month to cover the significantly higher annual price.
- Maintenance and upkeep – You will incur continuous maintenance and upkeep expenses whether you purchase a home in Chicagoland or somewhere else. For these expenses, experts advise that you set aside 1% to 2% of the value of your home.
- Big emergency projects – When purchasing a home, you will unavoidably have to pay a sizable sum at some point for urgent projects, which are often renovations and repairs like a new roof.
- Emergency fund – Additionally, you will need to continue building an emergency fund to pay for the significant repairs and see you through difficult times like a job loss. An emergency fund that can pay for three to six months’ worth of costs is advised by experts.
- Life insurance – Life insurance becomes even more crucial and you might need to buy more when you have a family and are buying a home. The ideal payoff is enough to pay off your entire mortgage and your family’s living expenses for several years.
- 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 a home purchase is actually rather easy, especially when it comes to your income. The challenge is identifying and then accounting for all associated costs, both one-time and continuing. An expert Chicagoland agent can assist you in calculating these costs in the neighborhood so that your budgeting is more precise. Call us at (312) 869-2289 right now if you’re ready to buying a house.