Dating Tips
A Couple’s Guide to Budgeting for a House
Wanting a home is one thing. Buying one is a different mammoth altogether. Budgeting for a house is among the challenging financial tasks couples inevitably face.
Taking this leap is huge for a reason. This means carefully reviewing your finances (and your partner’s) to ensure you’re ready for such a purchase. Like your relationship, this milestone is a commitment.
But how does this budgeting even work?
Whether this is your first time moving in together or not, buying a house can be intimidating. Here’s everything you need to know about budgeting for this big move.
House-Buying To-Do List
Setting a budget for buying a house involves more than just considering your finances. Don’t forget to cover these bases for a hassle-free purchase:
State/city/territory laws
You can’t just choose a house and call it a day. Every area has its specific laws. What may apply in one place won’t necessarily fly in another.
Do your homework and look up your chosen area’s real estate laws. This will save you money (and from many hang-ups) in the future.
Cohabitation agreements
Say you plan to live together as an unmarried couple. While there’s nothing wrong with moving in together, you may want to check the requirements.
Common-law couples don’t always get automatic property rights. Secure yourselves by getting a cohabitation agreement. This document defines both parties’ rights and obligations and provides added protection. Feel free to ask for legal assistance with this matter.
Mortgage application
How will you apply for your mortgage? Do you plan on a singular or joint application? Each has pros and cons; choose one that fits your needs and circumstances.
How to Budget for a House
Let’s get to the financial aspect. These should be part of your decision-making process:
Down payment
Often, buyers need to pay this in full. The down payment accounts for a percentage of a house’s overall cost. While this percentage varies, the National Association of Realtors reported that the median in 2023 was 14%.
Mortgage payment
A mortgage is a loan that people use to buy houses and other real estate properties. Paying this works similarly to paying rent — through monthly sums until you pay off the full amount of the loan.
Taxes
Fortunately, you don’t need to pay sales tax when buying a house. Still, it’s better to be safe than sorry, so you may want to take this into account.
Annual property taxes vary from place to place, so look them up before your purchase. You may even qualify for tax credits.
Insurance
According to financial advocate Courtney Alev, it’s not unusual to forget about insurance costs until the end of the home purchasing process. This can put buyers in compromising positions because they may overextend themselves financially to keep up with their monthly obligations.
And with that, you may want to consult an insurance agent. Their knowledge and expertise will come in handy.
Closing costs
This includes attorney fees, escrow funds, and appraisal fees. Going by its name, you’ll pay these on closing day.
Utilities
This covers water, electricity, internet, garbage, and other optional services. Since you’re purchasing a house, these costs may be higher than what you’ve paid while renting.
Renovations
This shouldn’t come as a surprise if you bought a place that needs some work. If you think some areas need inspection, call an expert to do the job. This will identify other spots that need fixing, saving you from future hassle.
Budgeting for a house shouldn’t be a one-man job. You and your partner should work together on this front. Fortunately, this guide should help you out.
Reference
National Association of Realtors. 2023. “2023 Home Buyers and Sellers Generational Trends Report.” National Association of Realtors. https://www.nar.realtor/sites/default/files/documents/2023-home-buyers-and-sellers-generational-trends-report-03-28-2023.pdf.
Wax, Shelby. 2024. “How to Create a Home Buying Budget as a Couple.” The Knot. https://www.theknot.com/content/home-buying-budget-tips.
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