Hypothetical Budget for First Time Home Buyer

Hi fellow YNABers! I'm gearing up to purchase my first home (eek!) and I'm trying to figure out how much mortgage I can responsibly afford, so I set up a separate hypothetical budget in YNAB. What categories should I make sure to include in this new budget? I have HOA, maintenance and repairs, insurance, the standard utilities...what am I missing? Thanks in advance :) 

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  • You're missing one important one: Mortgage. 馃槈What about Property Taxes? Are you going to have an escrow account? Savvy YNABers prefer to pay it separately so they keep the funds until they're due.

    Other possibilities: Appliances, Furniture, Remodeling.

    Like 5
      • Reby Lynn
      • Rebylynn
      • 1 mth ago
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      Superbone Haha, yes, I have mortgage on there :) I currently have the property tax et al lumped into the mortgage payment...are the due dates usually that different that its worth paying them separately? 

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      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 1 mth ago
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      Reby Lynn It's not just about due dates. I pay my property taxes twice a year and my home owners insurance once a year. When they are in escrow, you're paying them to the mortgage company on a monthly basis and then they are paid out  of the escrow account for you when they are due. At least in my experience, when in escrow, I would get adjustments every couple years. Now I might be suddenly paying $150 more per month to my mortgage. Then maybe back down a year or two later. I like my consistency of mortgage payments and I like me having my funds to pay for property tax and insurance sitting in savings earning 1% or more until they are due.

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      • Reby Lynn
      • Rebylynn
      • 1 mth ago
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      Superbone This is awesome - thanks so much!

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      • 3xDogDad
      • Financial Services Pro
      • Coral_Clarinet.6
      • 1 mth ago
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      Reby Lynn Be careful! Some lenders make you pay a higher interest rate if you don鈥檛 escrow with them. It鈥檚 higher risk for them if they don鈥檛 control the payment to taxes as that lien will trump their mortgage lien, and if they can鈥檛 guarantee your HOI is paid, they can lose the collateral if the home is a total loss. 

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      • nolesrule
      • YNAB4 Evangelist
      • nolesrule
      • 1 mth ago
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      3xDogDad That's why you don't tell them you aren't going to escrow until after you lock in the rate.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
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      3xDogDad Avoid those lenders! I have not experienced that and I've had great rates.  In 2016, I got a 30 year fixed at 3.25%. I'm just finishing up refinancing to a 2.875% 30-year-fixed.

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  • Also, any services you might outsource that don't fall under maintenance costs of the house itself, such as pest control or lawn care

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      • Reby Lynn
      • Rebylynn
      • 1 mth ago
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      nolesrule Oh! Yes! I don't even own a lawn mower...adding those in!

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  • That's exciting, Reby Lynn !  We have a separate category for our home insurance deductible. It's always ready! Just in case.

    While not a specific category, the first several months of homeownership were more expensive for "Home Maintenance" as we purchased tools, and supplies for the first time. Adding extra to the category up front may help! Or changes you want to make before you move in鈥攍ike painting.

    When you fall in love with a house, or get your inspection results鈥攁dd your "must-do" items to your budget, or even start a Wish Farm for specific projects. 

    Like 2
      • Reby Lynn
      • Rebylynn
      • 1 mth ago
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      Nicole Oh thats a good one! I had the premium down, but saving for the deductible is smart!  And just set up a Wish Farm on my current budget 馃檶

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  • When we purchased our home, a warranty came with it and we're asked to renew every year - best money we've spent towards our home year-to-date. The first year it replaced our garbage disposal and washing machine. We paid $750 for the second year of coverage, but our A/C unit went out and they paid $1600 towards the replacement along with some plumbing work.

    It has more than paid for itself (about three times over).  

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    • Faness home warranties can be a big help, and they usually aren't that expensive.
      BUT - a word of caution that some of them are pretty close to legal scams, and you have to be your own advocate. Case in point - the previous owners of our house (who still live next door, long story) had a contract with a home service company for the air conditioner, which we noticed was OLD when we were looking over the house. Come to find out, the service company was simply coming out and charging the system with freon, which would make it work well enough they wouldn't complain. It SHOULD have been replaced. We didn't get the warranty, which I'm glad we didn't (long story, too), and so we replaced the unit the first summer we were in the house. I'm happy to say our cooling bills are barely $100. I shudder to think what they would have been with the old unit if we had gotten it running. There is no way it would have been efficient.

      SO long story is that it's important to be your own advocate, and to pay attention to things. You can easily get scammed by those companies, and sometimes the work that is done is not of the highest quality. If you have anyone in your family who is handy, or have a close friend who is handy, it would likely be worth it to just set aside the money you would pay to the company and build up a fund and pay for it yourself.
      Insurances are just betting against yourself - and that money all goes into someone else's pocket.

      Like 1
  • I've heard you should save 1-2% of your home's value per year for maintainance and repairs.  I'm starting to do that now, so you're already ahead of me.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
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      PhysicsGal  Depends on where you live and the cost of housing. That range is way too high for me. I won't need a new roof every two years.

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      • PhysicsGal
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      • physicsgal
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      Superbone Yeah, true, if you're in a high COL state this "rule" will leave you with a lot of extra money for repairs.  Same here now.  I use the purchase price of my house 2011, not the insane amount of money people would supposedly be willing to pay for it today.

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    • PhysicsGal We saved our 1.5% (medium COL) and it served us well. We've had a few big home repairs in the last ~6 months and raised it to 3% for the time being, for extra padding.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
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      PhysicsGal I never in my life could have imagined paying as much as I did for my house (2016). And it's just a normal house. Nice but nothing special. Plus, I had to work hard to get a house at the price I did as I still have a 30 minute commute. If I wanted to live within 15 minutes of my job, I'd have to pay at least 50% more!

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      • PhysicsGal
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      • physicsgal
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      Superbone That's why I didn't move back to California after school, people who grew up there and aren't rich are priced out of the housing market and everyone has a long, painful commute.  I'm just glad I bought my home in 2011.  We didn't have a big housing bubble in the 2008 crisis here, but prices were down, then have gone way up since.  I'm basically priced out of my house now, unless I wanted to pay a lot more for my mortgage.  I'm lucky because I do live about 15 minutes from my work and about 15-20 minutes from downtown, but I'm just so glad I bought when I did.  And I love the idea of paying  off my mortgage, even though it doesn't necessarily make the most mathematical sense at my 3.125% interest rate.  But I want to feel how the grass feels when it's paid off.  I can always get another :)

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      • Superbone
      • YNAB convert since 2008
      • Superbone
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      PhysicsGal Dave Ramsey got to you! 馃槀I'm a math/engineer guy so I'm going to do  what's financially optimal. Sure, it's not guaranteed but the most likely better outcome over time will be to invest rather than dump extra into my 2.875% mortgage or even 3.25% before that.  However, I do plan to pay cash for my retirement home.

      Oh, and I don't mind my 30 minute commute at all! I had an hour plus for 14 years. Plus, I bought a really fun car to drive. 馃槃

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      • PhysicsGal
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      • physicsgal
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      Superbone Dave Ramsey is definitely part of it, but a part of it is because my parents have gotten a refinance every 2 years and spent all of the growing equity in their home (that ended up being worth over a million when they sold it to down size) and I think my response to that behavior is to do the opposite. 

      It's funny, I'm a physicist, so very quantitative, but to me, if it gives me security to have a paid for home, then I'm basically paying a little extra in lost investment income for that security, that's all.  And there is definitely a relative difference between the genders in our need for security, at least on average.  Dave Ramsey is right about that.  But my mortgage is only $175k...if I had a huge mortgage, maybe I would feel differently.

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      • Superbone
      • YNAB convert since 2008
      • Superbone
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      PhysicsGal Hey, that's why they call it personal finance, right? 馃檪Sounds like you plan to stay in that home too. I'm selling mine as soon as I retire and will live somewhere with a lower cost of living and pay cash for that home. So, for me, it would just be tying up my funds in the meantime. I listened to a lot of Dave back in the day. I was just having a little fun with your "But I want to feel how the grass feels when it's paid off." comment which was obviously DR inspired. 馃檪

      I got a lot out of Dave but like you, moved on. Especially when it comes to investing.

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  • My only real advice is that it's going to cost more than you think it will. LOL

    When you move in there will be all sorts of things you didn't plan on (of course we need a new bathroom organizer!), so make sure you have a miscellaneous fund that can handle oddball stuff like that. It is interesting moving and suddenly realizing you don't have a widget thingy that would make life SO much easier.

    The other thing that I have done is to scout out second hand stores and things for furniture and larger stuff. You'd be amazed at what you can come up with for free often, that will help you get to where you need to be. I think 90% of the furniture in our house was free, or extremely cheap. And we don't have cheap stuff. I have a number of antiques or older pieces that were given to me, so I didn't pay a dime for them.

    Best of luck, and enjoy the journey!! You're already ahead of the game if you are working with YNAB now! That will make life so much easier!

    Like 1
  • Thank you all for the super helpful advice! I'm happy to say that I'll be closing on my first home on July 17!

    Like 4
      • Superbone
      • YNAB convert since 2008
      • Superbone
      • 2 wk ago
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      Reby Lynn Yay! Congrats!

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