Buying a property in today’s market brings with it a range of new challenges and benefits, with the market being strongly affected by several factors which offer obstacles and opportunities alike. Such factors include house price appreciation (which is inching up though showing signs of slowing), increasing mortgage rates (which are sapping buyer purchasing power but also energizing the seller market among those looking to buy another property who are similarly concerned), and a general shortage of housing supply.
However, creating a buyer strategy for dealing with modern market realities may be vitally important, but there are some things which also never change. A buyer still needs a working buyer budget, and there are things included herein which should always be accounted for regardless of the current market situation. CityHome Collective, a real estate brokerage advising sellers and buyers around Salt Lake City, say that the age-old wisdom regarding buyer budget applies and creating a successful buyer strategy still hinges on establishing a buyer budget from the get-go. After that has been done, alteration can be made to account for new market factors.
What Should Be Included in a Buyer Budget?
If you are looking to buy a property – and especially if you’re a first-time buyer – then you should be sure to create a buyer budget that accounts for all the things that do not change. To that end, here follows a list of things that should always be accounted for in a budget. Cover these bases first and then seek the advice of a professional real estate brokerage to advise on all the other factors that could affect you today. This is where you begin.
A buyer budget must account for the down payment on any new property. Naturally, it is the one item of a buyer budget that is rarely forgotten. But of course, budgeting for a property’s down payment can be a little bit more complicated than that. A common rule of thumb that even the most inexperienced buyers are aware of is the need to set aside 20% of the home’s price for an effective down payment that will be accepted. This is a misconception. In reality, you may only have to put as little as 3.5% for a down payment, and sometimes one isn’t required at all. For those buyers hesitating because of cash flow issues or wishing to set aside funds for other things, this is of course good news.
Earnest Money Deposit
An earnest money deposit is not always necessary, but it is becoming increasingly common, especially in today’s low-supply market. It works like a deposit at the bidding stage, which makes it particularly useful as an act of good faith that helps makes you stand out among the, potentially, many other bidders out there.
At the other and of the entire process are the closing costs that you will certainly have to budget for. Closing costs can vary a lot as they can account for all manner of transaction costs at the point the property is sold. It is important to budget for this, but to do so effectively you may need some professional advice and info specific to the property in question.
Such are the things that you will always have to budget for before accounting for other costs. The best way to see if you can afford a move right now is to accurately budget from the beginning in order to get a much clearer idea of how much is left over for more market- and property-specific costs.