Whether you’re a single person, newly married couple, or young family looking to put down roots, the process of buying a first home can be both exhilarating and overwhelming. That’s why we created this guide to buying your first house in Bucks County. From answering the not-so-simple question of how much you can afford, to mapping out your budget as a homeowner, we’ll walk you through the process of moving from home browser to homeowner. When you’re ready to start, our First-Time Homebuyer Program offers localized expertise and assistance to buyers just like you.
How Much House Can You Afford?
While this seems like a simple question, the answer isn’t always obvious. Taking a conservative approach to home buying with a price range below the maximum you could afford leaves a cushion in your monthly budget for unanticipated repairs and other home costs, as well as the other things you want to spend money on in life (travel, entertainment, etc.). Here are some questions to ask yourself before you settle on a price range.
- What is your monthly income? This is the amount that ends up in your bank account after taxes, health insurance premiums, retirement contributions, and any other automatic withholdings. If you’re buying the house with your spouse or partner, include their monthly income, too.
- What is 30 percent of your monthly household income? The answer is the maximum amount you should spend on housing including the mortgage payment, taxes, and insurance costs. This income-to-housing-ratio was created by the US National Housing Act of 1937. The exact percentage has been at 30 percent since the 1980s.
- Want to be conservative? Aim for only 25-28 percent. Some personal finance experts recommend spending even less than 30 percent on monthly housing costs. This is where your own discretion comes in. You may want or need to err on the conservative side due to factors such as your debt-to-income ratio, plans to start a family in the near future, or simply the desire to prioritize spending on another important part of your life like travel or other hobbies.
- How much can you put down? The size of your down payment can make a big difference when it comes to figuring out an affordable housing payment. If you can put 20 percent or more down, the overall amount of your loan will come down significantly, resulting in a lower monthly payment. On the other hand, a lower down payment means your total mortgage will stay close to the purchase price of the house. Use The First’s Loan Calculator to figure out what your monthly mortgage payment would be based on principal, interest rate, and term. You can check our current fixed interest rates to use as an example.
- What about taxes and insurance? Our loan calculator helps you figure out your monthly mortgage payment, but taxes and insurance are bundled into loan payments as well, raising the total monthly payment. You can usually view the annual and/or monthly tax burden on a particular house in the listing. If you’re not sure, ask your realtor. To figure out how much you might spend on homeowner’s insurance, ask your current car insurance company if they can give you a quote on combining home/auto insurance. Lastly, if you put less than 20 percent down you’ll need to pay for Private Mortgage Insurance (PMI). The cost of PMI can range from 0.5-1 percent of the loan balance.
- What’s your credit score? The higher it is, the lower your interest rate will be (a percentage that also factors into your loan principal and monthly payments). You can check your score on FreeAnnualCreditReport.com or with a free monitoring app like Credit Karma.
Now that you have a sense of the monthly housing payment you can afford, let’s test it with a monthly budget that has space for your current expenses as well as the additional costs–such as repairs–you’ll incur with home ownership.
Create A Budget You Can Live With
If you’re living in a rental, you already have a monthly housing cost in your budget. Now you just need to adjust it to reflect your estimated mortgage payment. First-time homebuyers who have been living with family to save money will have a bigger adjustment to make. Regardless of your current situation, every budget starts with fixed expenses. These vary by person but generally consist of housing costs, insurance (auto, health, etc.), utilities, cable/Internet/phone, and debt payments.
The math so far is straightforward: add up these fixed expenses and subtract the total from the monthly income figure you identified above. What’s left over is more or less “discretionary” but you can spend a lot of time reading different experts’ takes on how to divvy it up. Before you do a deep dive into the world of personal finance, think about your personality and preferences. Believe it or not, some people enjoy crunching numbers. If this is you, budgeting probably comes naturally, and you may not need much help. Then there are the folks who would rather get a root canal than create even the simplest of budgets. If this describes your feelings on the matter, you might benefit from using a computer program/app like Mint or You Need A Budget.
Another helpful approach is to track your actual spending for a month or two and use that as a guide to creating a budget. Many people draw up a spending plan with the best intentions but spend money in a more emotional or impulsive way. Analyzing your natural spending patterns can help you devise a more realistic budget. And if you want or need to cut back your spending in certain categories, knowing the existing total helps you set incremental goals (i.e. cut $50 from next month’s spending on dining out) that are easier to stick to than more drastic measures (don’t eat out at all next month).
Whatever your monthly budget ends up looking like, it should include one or more categories for saving. This is true for everyone but especially homeowners, who could be hit with a broken water heater or leaky roof at any time. Setting aside money for home repairs, in addition to your retirement and general emergency funds, will help you absorb the extra costs of home ownership without breaking a sweat.
Costs Of Home Ownership In Bucks County
Now that we’ve covered the general costs of home ownership, let’s look at Bucks County specifically. It’s one of the counties in the Philadelphia metro area and comprises a large footprint of small towns and more rural or suburban areas. According to recent research from the Economic Policy Institute, a family of four would need about $8,000 in take-home pay each month to cover cost-of-living basics (any discretionary spending would be on top of this total). You can change the calculator to reflect your own household size and monthly expense estimate.
BestPlaces.net says the cost of housing is the reason living in Bucks is more expensive than the national average. The median home price in the county is $316,200, according to their reporting. Luckily, there are a wide variety of places to live in Bucks and the region is within commuting distance to Philadelphia, Central New Jersey, and New York City. No wonder Money named Levittown, in Lower Bucks County, one of its 2016 Best Places To Live. Whether you’ve lived here for years or you’re looking to relocate to Bucks County, you’ll be able to find a neighborhood that is perfect for your needs.
Apply For A Mortgage Loan
So you’re ready to hit the pavement, find “the one” best home for you, and make an offer. There’s only one more thing to do: choose a mortgage lender, get pre-approved, and begin the full application process. It’s natural to feel overwhelmed by all the choices out there. That’s why we recommend starting with a local lender, who may have special programs for first-time buyers. Here at The First, we love helping people become homeowners for the first time. Our First Time Homebuyer Program enables families and individuals who meet eligibility requirements to purchase a house with as little as 5 percent down. Besides our specialized attention for new buyers, you’ll love our competitive rates and knowledgeable mortgage officers. Find out why generations of Bucks residents have trusted the First to help them realize the dream of homeownership.