First Time Home Buyer Budgeting Tips You Should Think About

Our first guest post!  Thanks to Mr. CBB…see the contest details at the bottom of the post!

First Time Home Buyer Budgeting Tips You Should Think About

Written By: Canadian Budget Binder

When you become a first time new home buyer budgeting is often overlooked as it’s not part of the dream. First Time Home Buyers want to move right in renovate and fill each room with beautiful decor and forget about the costs that come with a home purchase. There are people who can only dream of owning their own home but for those that take the giant step it does come with its pros and cons. This is why it is imperative to know all the facts before signing on the dotted line.  You need to know what you can realistically afford ahead of time and not get caught up in the new home hoopla.  Having First Time Home Buyer tunnel vision could potentially hurt you down the line.

What you should be aware of………..

Do you know what projected expenses are?

These expenses are ones that you pay every couple of months or even yearly that you know you have to pay for. These expenses MUST be saved for every month for when the time comes you are armed with the money to pay. We save this money in a separate bank account every month, all year-long. We think of every single thing we “know” we will have to pay for at some point in the year and create a category for it.  Most people who don’t budget in these projected expenses end up turning to their Emergency Savings, if they have one or what I don’t suggest using, credit. This is one of the biggest reasons people go into debt when they rely on credit as a second or third income.

Example: You pay for your Vehicle Sticker every year $74/12 months=$6.16 per month you must save 12 months of the year.

or

If you pay your own house taxes you may pay quarterly so you need to make sure you have that money ready. If you pay $3400 a year for taxes you should be saving $283.33 per month in your projected expenses account.

Wouldn’t you feel better knowing the money is in a separate account when the bill comes in?  I know we do!

You know a budget is important and if you don’t you need to be researching http://canadianbudgetbinder.com/2012/01/24/how-we-began-our-budget-step-1/” target=”_blank”>how to design a budget that is right for you.  I also suggest that if you don’t know your credit score to order one for free which you can do in Canada once per year. You need to know where your financial health stands.

Buying your first house comes with Expenses that you need to be ready for in advance. What are some of these common expenses? Make a list, and budget for these! Most times if you are frugal you can find many of these items at Garage Sales or on Kijiji.

  • Window Coverings/Curtains, Blinds, California Shutters
  • Furnishings, Decor, Bedroom Suites, Wall Hangings
  • Television
  • Garden tools- shovel, rake, lawn mower, weed trimmer
  • Landscape materials- flowers, soil, mulch, fertilizer,grass seed
  • Handy Man/Women’s Tool Kit
  • Cleaning Supplies
  • You may want to change the locks- Who know’s who has the key!
  • Snow Removal Tools- Snow shovel, Snow Thrower
  • Appliances-washer,dryer,refrigerator,dishwasher,microwave,freezer, stove (not all new homes come with working appliances)
  • Kitchen Utensils and accessories- dishes, mugs, knives,forks, pots etc
  • Linens, Towels,Bath Accessories
  • Rugs,Carpets to make your space cozy
  • Utility service charges as some companies will charge you a fee if you are a new subscriber. Some may ask for $400 security, you can call ahead and ask what they will be so you can plan.

Keep in mind that is not a comprehensive list and most are simple necessities to keep up a home. As you can see it can get costly so preparing ahead of time will save you money down the road.

Before we purchased our home we saved for a down-payment  but we had to learn how to make the right calculations work for our budget.  We had made the classic mistake as most newlyweds who need a budget but don’t really know where to begin or think they know how. We tried to budget in our heads and although we saved some money it wasn’t nearly what we should have.

Since then we designed our own budget first by setting goals. You need to know where you want to be headed or least have an idea. If you know you want to have children keep in mind the costs of a child and having to http://canadianbudgetbinder.com/2012/06/07/maternity-and-parental-leave-part-2-budgeting/” target=”_blank”>budget while on maternity leave. Don’t say you will deal with it when the time comes because that’s when couple’s panic.

Here are 9 Steps we used when we designed our budget in our Budgeting Series

  1. Gather all of the information- Net income, all of your bills, who you owe money to.. even if it is family members
  2. Categories- Sort out what categories you need in your budget. It may be kids activities, March Break, RRSP, TFSA, Cable, etc…..
  3. Tracking Receipts- It’s imperative that you track every receipt in your budget. You need to know where the money is going. We always ask for a receipt even if we go to Tim Horton’s. Get used to asking.
  4. Note taking-Keeping accurate notes in your budget is also imperative. If you ever need to reference data it’s important to know what and where the numbers came from. It also helps when the bills come in to compare what you might have on a credit card in comparison to the receipts you input in your spreadsheet or paper budget.
  5. Organization- We made sure we were organized, we knew where everything went, time tables, schedules, file folders- there was a plan in place. If you stay organized you are more likely to continue using your budget. If you can’t see your desk and don’t know where the receipts are you will get frustrated and give up. It’s not difficult to stay organized so clean up your space and de-clutter.
  6. Who Does What And When-It’s important if you are a couple that both of you participate in the budgeting process. There can’t be just one person. If something should happen to one person the other needs to know where to pick up the pieces. We have a schedule and we work as a team.
  7. Balancing Our Budget-It’s important that your budget balances. You need to use your “net income” (what is deposited into your bank) to design a budget that balances. If you are spending more in the budget than you earn you have some serious work to do. You can’t spend more than you earn. You need to balance the budget.
  8. Knowing Our Coupon Savings- Not everyone coupons but we do, we also price match, shop flyer deals, get reduced items. Most people are couponing now and want to track the savings. We have implemented this into our spreadsheet so we can track it. We can also track any other discounts that we get as well.
  9. Reading Our Bills- Have you ever paid too much for a bill? If you don’t read your bills you should start. Don’t rely on computers to get it right because anyone and anything can make a mistake. You don’t want to be the one paying for it. We always read our bills and match up any charges on our credit cards to the data in our spreadsheet.

As you can see there is alot to think about before purchasing your first home. Don’t let anyone pressure you or tell you the time is now so you better buy before it’s too late. Take the time to make informed decisions, talk to the professionals in the mortgage business to give you accurate data to work with. Plan out your path to home ownership whilst implementing your present and future goals financially and you should be well on your way to debt freedom.

You can Follow Mr.CBB on Facebook, Twitter or Pinterest. come join the conversation!

Visit the CanadianBudgetBinder Blog Here to learn about Budgeting, Finance, Frugal Tips, Recipes and more!

Cheers,

Mr.CBB

Photo Credit:Copyright (c) <a href=’http://www.123rf.com’>123RF Stock Photos</a>

Thanks for a great post Mr. CBB, we can all learn from this!  Do you have a comment from your own experience, a tip to add or?  The best comment judged by me wins a $50 gift certificate to itunes!  Draw will be announced June 22, 2012.

Comments

  1. Jaimee Mcallister says:

    A good tip for buying a new house? Go through the place where you currently live, make a list of the things you want to replace, want to throw out, and would donate/sell. It will help make moving easier, and it will also help to perfect the budget you need for a new house. Selling items you dont use can be put towards the items you want to replace.
    When looking for a new house, check for anything you will need to replace/refinish/fix. See if you can get them fixed or replaced by the seller, if not, keep in mind you will need to pay for it and include it in your budget.

  2. Great article Mr CBB! I wish I had read something like this before I bought my first home 9 years ago! Our house was new and we waited 3 years for it to be built. I wish we were smart enough to save like crazy while we waited, but we didn’t. I was smart enough to purchase a lot of decor at garage sales (I also wish I knew about freecycle back then!), I also did not know about a lot of those hidden or forgotten costs…water heater rental, water softner, property taxes, maintenance (even though it was new), landscaping, etc. One thing that really did me in was that because it was a new property it had not been assessed by pmac (I think that’s what it’s called?). I was not assessed for several months after I moved in. By the time I received the bill my husband and I had separated and I was trying to manage the house on my own. I had no money!! I ended up borrowing from my parents to pay the $1800 bill. I now pay monthly to ensure I always have the money for property taxes. I also was talked into taking out a large RRSP loan so that I could get a large income tax refund and use money towards the down payment. The lady failed to inform me that I had to pay back that money (the RRSP’s borrowed for the down payment) every year on my taxes so the first year I filed after that I didn’t take that into account and ended up getting a notice from the government that I owed them over $600! I also didn’t have this money as I was struggling to keep the house on my own!!! Live and learn!!!! :-)

  3. Great Article. A few things I would add to factor into your first-time homebuyer budget is lawyers fees and a home inspection. Also a bonus for first time home buyers. First Time Home Buyers Ontario Land Transfer Tax Credit (up to $2000)

    The Land Transfer Tax Credit is a refund of the cost of the provinces land transfer tax up to a maximum of $2,000. This will allow first time home buyers to purchase a home up to $227,500 without having to pay any land transfer fee. Any amount higher than $227,500 is taxed a rate of approximately 1.5%. To qualify the property must be owner occupied. The first time home purchaser may claim the full maximum amount or a proportion of the maximum refund amount. To qualify for the Land Transfer Tax Credit, you cannot have ever owned a home, or an interest in a home, anywhere in the world. The refund can be given instantly at the lawyers office but advise the lawyer prior to the closing date if you qualify for the rebate

  4. Brad Gold says:

    Something else to think about when signing the papers with the bank is the lawyer fees involved in transferring the title to the place…which are entirely too high for what little the lawyer has to do. I was actually told that by our lawyer when we bought our place and he couldn’t change how much he was charging as the fees were set by the bar nationwide…but he did put us on a payment plan with him and never had us finish paying it off after the first grand.
    Yet another thing to think about is the house payments…some people think that paying a single amount once a month works better for them. Trust me, it doesn’t. Do bi-weekly payments and you’ll pound that principle down faster and end up trimming time off the life of the mortgage and save yourself a fair bit in interest. Just set the money aside for the extra payments and not touch it.

  5. Thanks guys, more good info…keep it coming!

  6. Wendy L says:

    There’s definitely a lot more to buying a house, than just buying a house…I don’t think some people realize this! The upkeep alone can take a chunk of your money. I believe that everything comes with time, hardly anyone can afford to do all their renovations at once. I try to do a couple things a year, then eventually my house will be as I want it, and up to par as well with reno’s.
    Budgeting helps a lot!! My next step is to look into bi-weekly payments, instead of monthly..whatever pays it off quicker works for me:)
    Thanks for sharing!

  7. nickydon40 says:

    Yep, you don’t realise how much u have to pay out so this is really useful to have and know. We saved for our new house here in Canada and it sure was worth it! We were glad not to have a 100% morgage and able to put down a big % of it.

  8. Melissa says:

    Thank you for this helpful info we are just looking into a mortgage ad this helps us to see if we can afford it or not :)

  9. Thanks Melissa, if I can help, let me know!

  10. Congratulations Charlene (Vidal), you are our winner of the $50 iTunes card!

  11. Congratulations Charlene and thank you to all my fans and new fans here that dropped in to read my guest post. I’ve read all your comments and they were all great. Cheers Mr.CBB

Trackbacks

  1. [...] First Time Home Buyer Budgeting Tips You Should Think About-Michael Anthony Llyod- DailyDig (Mortgage Expert) and blogger at househappy [...]

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