Posted on: 30 July 2018
Even if you find a home that fits within a comfortable mortgage, you will need to have a good deal of cash amassed before signing on the dotted line. This cash will go towards things like making a solid down payment, setting aside money to confront the unexpected, and replacing appliances and other items to make yourself more comfortable.
Banks Need to See Cash Reserves
Before giving you a mortgage, banks need proof that you are capable of paying for the credit on a home. This is why you need cash reserves when applying. The exact amount you need to have in reserve will vary, but it's important to consider that saving up for a down payment will not be enough.
With the help of a financial planner or real estate agent, you will be better able to account for the additional fees that go into buying a home. This may include closing fees, legal fees, fees for inspections, and mandatory repairs before you can safely and comfortably move into the home.
Facing the Unexpected
As a future homeowner, you need to prepare for hazardous situations. What happens if, shortly after buying a home, you experience a natural disaster? Some of the damage can be handled by an insurance company, but reimbursement isn't always immediate; you may have to pay out of pocket and get refunded at a later date. This is just one more reason why cash reserves are important.
Funds for Appliances
A reserve fund for regular maintenance needs to be kept as well. This is important for a situation in which you break something in the home and it needs to be replaced. This applies to any expensive apparatus the house holds. You could go for empty real estate, but you still may have to pay for roofing repair and other similar things. No preowned home is perfect.
This information is meant to prepare you for the realities of owning a home. Consult a mortgage specialist to see how much of a down payment you are likely to need. A good real estate agent can tell you how much to budget in cash reserves (which is what's left over after the down payment). They will help you with generally understanding how your finances will affect your home purchase. You'll be glad you did the math to ensure you're well prepared to own your first home.Share