A new study by Bank of America found that parents consider schools to be a critical factor in their decision to buy a home.
The report found that:
- 21% of parents looking to buy a home would consider buying a less expensive one, so that they could afford a more expensive education for their children.
- 14% of parents would consider purchasing a home near campus for a child in college.
- 64% of parents say quality or ranking of the schools their children may attend is extremely important when purchasing a new home.
- 34% of parents believe close distance to the school is an extremely important factor in the home buying decision.
- 22% of parents say the ability for their children to walk to school is very important.
Regardless of the role your child’s school is playing in your home buying decision, most financial experts will tell you that you shouldn’t spend more than 30% of your after-tax income on all housing-related expenses.
If you are considering buying a home, in addition to the mortgage, keep the following expenses in mind:
- Know how much cash you’ll need at closing. When you buy your home, you will need to pay a down payment and closing costs. The down payment typically varies from 5-20%. Putting less than 20% down will typically require you to pay for private mortgage insurance. Closing costs could be about 3% of the total loan amount, and will include charges such as loan origination fees, title insurance, and appraisal fees.
- Budget for private mortgage insurance. For a conventional mortgage, this is typically necessary if you don’t put down at least 20%. Make sure you know how much this cost will be and factor it into your monthly budget.
- Research utilities. If you’re upsizing, moving into a newer or older home than you’re used to or one located in a climate that’s hotter or colder than you’re used to, ask your real estate professional to find out what the home’s energy bills typically have been like. This can prevent being surprised by a higher utility bill than expected. If you’re moving into a new community, find out about water costs as well.
- Don’t forget miscellaneous expenses. Be sure to budget for moving expenses as well as additional maintenance costs. Newer homes tend to need less maintenance than older ones, but all homes require upkeep. If you’re considering a condo or a home with a homeowners association, also remember to include monthly dues in your budget.
Money management skills are going to be as crucial to your child’s development as their education. Be sure to be a good role model with your important financial decisions, including purchasing a home.