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Knowledge Center

Planning for Extra Expenses of Homeownership

Buying a home is one of the largest purchases you’ll ever make. It’s fair to say everyone has a different view of affordability and what fits into your monthly budget will vary. Figuring out that sweet spot requires more than a pre-approval and a monthly mortgage payment.

If you don’t follow a formal budget, there could be some opportunities for you to control your spending and saving. Budgeting is an important part of preparing yourself for purchasing a home. It allows you to look at the reality of your finances and plan for unexpected costs.

Read below for some tips on how to budget for homebuying and maintenance.

Preparing to Buy a Home

Owning a home, and property, includes upfront expenses, like closing costs, and ongoing costs, like maintenance and property taxes. Aim for a monthly mortgage payment that won’t stretch your budget too far, along with some cushion to handle emergencies and other unexpected fees.

  • The 28% rule is a guide that determines how much home you might be able to afford.  According to this rule, you should not spend more than 28% of your income on your mortgage. This includes all mortgage fees and insurance.

  • Breaking down your mortgage payment includes the principal, interest, taxes, and insurance. You may be required to have mortgage insurance if your down payment doesn’t meet certain financial criteria. This is to protect the lender in the event you are unable to repay your loan.

  • Your other existing debt, and recurring debt, will also be factored into the equation. Your debt-to-income ratio can help determine what good and bad debt you have and how that will affect your mortgage.

  • Do your research. RMS mortgage calculators make it easy to explore different scenarios. Take a look at the different resources RMS provides to help you make important financial decisions about your mortgage.

Plan for Expenses and Maintenance

You may already have been covering household expenses such as electricity, water, heat, etc., if you were renting and if some of those were included in your rent, be sure to add them to your future homeowner budget. Home maintenance helps your home run efficiently and keeps your house in good condition. There are a few popular rules of thumb used to estimate how much homeowners will spend annually on home maintenance.

  • The 1% Rule: Budget 1% of the purchase price of your home each year to go towards home maintenance.

  • The Square Foot Rule: Budget $1 per square foot of your house per year for maintenance and home repairs.

Keep in mind that these general rules for home maintenance and repair budgets DO NOT take into consideration many factors like the age of your home, the location, the weather of the area where you live and the condition of your house. All these factors can affect your yearly maintenance and repair expenses.

Prepare for new household items

There are many items that first-time homebuyers may need to purchase for their new home. See below for a list of some of the popular items new homeowners buy within the first few weeks of moving in.

Must Have:

  • Home safety – Start safe with these suggested tips on keeping your security top of mind.

    • fire extinguisher

    • smoke and carbon monoxide alarms

    • new locks and keys

    • curtains, blinds, window coverings, and light timers

    • First-aid kit

  • Light bulbs – LED bulbs are better quality and have a longer lifespan.

  • Maintenance and Upkeep:

    • snow shovel (if applicable)

    • tool kit

Nice to Have:

  • grill

  • garden hose, rake, garden tools

  • lawn mower (if applicable)

  • new furniture

Our Road to your New Home pamphlet lays out each step for the homebuying process. This may give you insight into when you should consider buying these must-haves and nice-to-haves, keeping your budget in mind.

Making sure things like maintenance, repairs, and additional household items are included in your budgeting will help you decide how much home you can comfortably afford. It pays to speak with local experts early in the homebuying process so you can focus on the right price range and buy your dream home.

Once you feel comfortable with your expenses and your budget is on track, it’s important to review it periodically during the year. Set up a quarterly review and you might be surprised when and where you can move money around. There are a lot of steps in buying a home. RMS wants to make sure you feel comfortable before you sign on the dotted line and have a positive homeownership experience.