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Initial costs of a new home
DH & I are going to begin house-shopping in about six months. In the meantime, and until we find a home to purchase, we are putting back about 1K/month. Depending on how long it takes to find a house, we will have anywhere between 8 to 11K saved for our down payment (I'm including our full anticipated 2012 tax return in this figure).
My question is, how much of our savings, if any, should we hold back for the initial costs of buying a new home? I'm trying to think ahead and consider fees such as electricity and water startup, cable or satellite installation, etc. If anyone would like to share their experience or advice, I would really appreciate it! TIA!
FWIW, we've already spoken with a loan officer, and a down payment won't be required since we meet the criteria for a first-time homebuyer's loan. BUT I would like to be able to put a small percentage down on a home.
Re: Initial costs of a new home
We've got our eye on about 3 houses right now. They are all new, because I know that if I were to buy something that needed repair right off the bat, it would never get done. Lol. That said, I do understand that unforeseen costs can arise in the first few months after buying a home.
I may get slaughtered for this, but it's an economic truth: depending on the price range you're looking in, it may not make mathematical sense to put down a pittance on the house. If you buy a $200k house, your payment (no taxes, ins, etc) would be $1013. If you put down $10k on it and finance $190k, your payment would be $962. That's a $51/month difference. Put that into $10k, and you'll have to live in the house for 196 months or 16 years for it to be worth it. With a young family, that $10k would probably be more useful in your own pocket or savings account.
As for start up costs and deposits, it varies widely by area. For example, we move often, and in one town we lived in, you have to put down $300 just to get electricity turned on. (No option for a credit check instead.) I have no idea how the poor afford that. I think $1k for start up costs will cover everything that could come up.
But have you thought about things like a lawnmower, paint, blinds? Some new homes don't even come with towel bars, so you'll have to put those in every bath and they add up.
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One thing to think of is, are these houses you are looking at "New" or just "New to you"? If NEW, you will need to consider costs like blinds/shades, curtains/rods which might seem like small things, but add up significantly! Our house has roughly 16 windows, and blinds were approximately $75-100 per window. We purchased curtain rods/curtains for some rooms as well. (Allow $1,000)
We also needed to paint several rooms in the house since they were originally done with flat paint and they scuff/mark up so easily. ($200 DIY)
We had to buy a fridge, and replaced the other appliances at the same time. (Paid $2,500)
We've replaced several light fixtures because they were builder brass (paid $300).
Utility start up, deposits etc was roughly $500.
I would probably keep $3000-5000 on hand for these types of expenses. The first few months can be very expensive! However, the finished product feels just like home.
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The homes we have viewed are brand new, and the average price for a 3BR/2-bath with a bonus room and attached garage typically fall into the $150-175K range. So that's not too bad. We do have a lawnmower, as well as most other home furnishings (aside from appliances), but I know that I'll probably want something fresh when we buy something of our own.
I've also started a hope chest for things I pick up until then. Blinds and window treatments are definitely on the list for that, because I know they can be really pricey.
As a reminder, in addition to money to cover your down payment and closing costs (at least 3.5% dp and another 3% for closing costs), you need to have 6 months worth of expenses just chilling in your accounts for emergencies. Serious illnesses, car accidents, etc. don't care that you just bought a house. They can happen at any time, and you need to be prepared. So you'd need about $10k for a down payment and closing costs. You'll need another $14k in the bank for an emergency fund. And you'll need a new home fund. As PPs stated, you'll find yourself buying new home and lawn equipment, want new curtains, furniture, rugs, bathroom accessories, etc., etc., etc. Take whatever you think your new home decorating fund should be, and increase it by at least 50%. So you're going to need at least $25k in the bank, but I'd recommend $30k or more just to give yourself a cushion.
BTW... I really would not recommend buying anything now. You have no idea what life has in store for you, and the style you think you like may end up being very different from your final vision. It would be a shame to buy things now, only to go off in a totally different direction and buy stuff all over again to fit your new vision.
Also realize that more things may come up in the home inspection that you have to pay for if you want the house. For instance, the sellers are covering all the required elements that occurred in the inspection, but are not covering the "optional" ones. We want the house and it wasn't a deal breaker for us, so we're going to do these ourselves. This includes: getting two more fire/carbon monoxide detectors, hiring someone to trim back tree branches that are resting on the roof, getting someone to clean the air conditioner, buying a battery back-up for our sump pump, getting Roto-Rooter out to make sure no roots are interfering with our pipes, etc. Individually, none are too bad, but together they add up.
Besides lawn items (shovels, rakes, hoses, sprinklers, etc) if you are moving into a larger place, you'll need/want more furniture and decor. It's also costing us about $600 for interior paint plus painting supplies, since more than likely you'll at least want to paint something on the interior unless it perfectly matches your tastes/furniture. Also plan that if it's bigger than where you're living, utility costs per month will likely rise.
I just wanted to comment on buying new. It is amazing how much money you can end up sinking into a new house - sometimes more than you would an older house that is in good shape.
For example: to avoid crappy builder grade things, upgrading fixtures, toilets, etc cost us about $3,000. A shed, $5,300, riding lawnmower since we have a large yard, $2,000. Getting some landscaping done since new homes generally don't have much of anything, $2,000. If you include the sprinkler system we got so that the new hydroseed would grow, another $3,000 (and it didn't even end up growing in right and now we have to replace the whole lawn). Blinds/curtains/rods, already spent easily $1,000 and still have some bare windows. Grill, $800, put in a patio, $2,000, patio set, $900. Flooring for the unfinished basement, $750, second couch set since we had more space now, $2,000, extra TV for the second family room, $1,600. The fridge the new house did not come with, $2,800. As you can see, start up costs add up really fast, that's closing in on $30K right there, and we still have so far to go before our house feels "done". All in all, I just wanted to make sure you realize buying a new house does not mean it's a house that has everything it needs.
Thanks for giving me such an in-depth look at your expenses! It really helps me gauge what we may end up needing.
I met with the contractor of our favorite house (so far) and he gave me a comprehensive price that would include appliances and landscaping, as well as custom faux-wood blinds for the entire house if we opted to add an extra $400 to the price. The lot is only .5 acres, and it's pretty shady so DH won't have trouble mowing it with a push-mower. Now that I see what all can come up, his offer sounds like a pretty good deal! Thanks!
just an FYI, we took advantage of our credit unions 1st time homebuyers program and they paid our closing costs, but we still had to bring almost $9,000 to our closing for lawyers fees and different things.
We also had to pay for 1 year of homeowners insurance upfront so you may want to ask your insurance company about that too