Step 3 Home Buying 101: Budgeting for Upfront Costs

Step 3 in Our First-Time Buyer Blog Series

Welcome back to our Home Buying 101 series! So far, we’ve covered how to get your financial house in order and the power of getting pre-approved. Now, let’s talk about something first-time buyers often overlook until it’s crunch time: upfront costs. If you missed the previous posts catch up here, it's time for your next big move.

Home Buying 101: Budgeting for Upfront Costs

Besides your down payment and monthly mortgage, there are some essential upfront costs you’ll need to plan for before you even close on a home. Budgeting for these now can help you avoid surprises later and keep your home buying journey stress-free.

Ready to Buy or Sell? Start Here

What Are Upfront Costs?

Here’s a breakdown of the common upfront expenses you'll encounter before you close on your new home:

Option Money

This is a small non-refundable fee you pay the seller for a short period (typically 3–7 days) called the option period. During this time, you can have the home inspected and back out of the contract for any reason without losing your earnest money deposit.

💡Think of it like paying for peace of mind while you double-check the home's condition.

Earnest Money Deposit (EMD)

This is your way of showing the seller, “I’m serious.”Earnest money is typically 1–2% of the home’s purchase price and is held in escrow. It’s applied toward your closing costs or down payment at closing.

💡 If you walk away outside of your contract terms, you risk losing this money so it’s important to know your timelines.

Home Inspection Fee

Hiring a licensed home inspector is one of the smartest investments you can make. They’ll assess the home's condition and alert you to any issues—big or small.

💡 Average cost: $400–$800 depending on home size and location. This can save you thousands by uncovering problems early.

Time Spent House Hunting

This one doesn’t have a price tag—but it’s definitely a cost. You’ll spend time researching neighborhoods, attending showings, evaluating pros and cons, and comparing homes. It may take weeks (or months), but don’t rush the process.

💡 Your time and energy are valuable, and this step is all about finding the home that feels right for you.

Plan Wisely, Win Big

Budgeting for these expenses ahead of time gives you a competitive edge. When you're financially prepared, you're ready to move quickly—and that’s a huge advantage in today’s market.

Let’s get started. Reach out now to Alex Watson, your trusted Realtor®, at 254-307-1596 or connect with me on social media @WatsonInvestRealtor. Let's get you into your dream home!

Ready to Buy or Sell? Start Here

If you missed the previous posts in the series, check out the 1st post and catch up here.

Step 2 Home Buying 101: Get Pre-Approved with Confidence

Step 2 in Our First-Time Buyer Blog Series

Welcome back to the Home Buying 101 series! Now that you've gotten your financial house in order (if you missed that post, catch up here), it's time for your next big move:

📋 Getting Pre-Approved by a Lender!

This step isn't just a formality, obtaining your pre-approval is your golden ticket to shopping with purpose, negotiating with power, and securing the home you love.

Why Pre-Approval Matters

In today’s market, being pre-approved is more than just a nice-to-have—it’s a must.

✅ Know Your Numbers

Find out exactly how much home you can afford based on your income, debts, and credit.

✅ Stand Out from the Crowd

Sellers want serious buyers. A pre-approval letter shows you're ready, willing, and able to make an offer.

✅ Streamline the Process

You’ll save time, reduce stress, and make smarter decisions when you already know your budget and loan options.

Ready to Buy or Sell? Start Here

Home Buying 101: Get Pre-Approved with Confidence

🔍 How Pre-Approval Works

Getting pre-approved is a simple process that gives your lender insight into your financial health. Here’s what to expect:

Example of a proof of funds/pre-approval document. These can be customized to specific properties once you've located the home.

1️⃣ Verify Employment & Income

You’ll provide recent pay stubs, W-2s or tax returns (typically last two years), and documentation of any side hustle or freelance income.

2️⃣ Verify Assets

This includes bank statements, retirement accounts, or investment portfolios. Lenders want to confirm you have enough to cover the down payment and closing costs.

3️⃣ List Current Debts & Monthly Payments

Student loans, car notes, credit cards, personal loans—anything you pay monthly needs to be accounted for.

4️⃣ Credit Evaluation

Your credit score and credit history will be reviewed to determine your loan eligibility and interest rate.

5️⃣ Receive Pre-Approval Letter

Once everything checks out, you’ll receive a letter stating how much you’re pre-approved to borrow. This is your official green light to start home shopping!

💪🏼 Take Control of Your Home Buying Journey

The sooner you're pre-approved, the sooner you can confidently shop for homes within your price range—and act fast when you find the right one.

Don't miss out on your dream home by waiting too long. Let's get you pre-approved and house hunting with confidence!

👉 Schedule your FREE Buyer Consultation with me Today. We'll walk through your goals, match you with trusted lenders, and get you fully prepared for this exciting next step.

Ready to Buy or Sell? Start Here

Let’s get started. Reach out now to Alex Watson, your trusted Realtor®, at 254-307-1596 or connect with me on social media @WatsonInvestRealtor. Let's get you into your dream home!

Ready to Buy or Sell? Start Here

If you missed the previous post in the series, catch up here.

Step 1 Home Buying 101: Get Your Financial House in Order

Step 1 in Our First-Time Buyer Blog Series

Are you dreaming of becoming a homeowner? For many first-time buyers, the path to getting those keys starts well before you ever step foot inside a home. The journey begins by getting your financial house in order and trust me, it makes all the difference when you're ready to request a pre-approval.

This is one of the most exciting milestones in life, and my mission is to make sure you feel informed, confident, and ready for each step along the way.

In this Home Buying 101 series, we’ll break down the entire home buying journey into manageable steps—starting with one of the most important and most overlooked: Getting your financial house in order.

Ready to Buy or Sell? Start Here

Think of pre-approval like a financial snapshot. It gives you, your trusted Realtor®, and your lender a clear view of your current standing. You will have a clear understanding on what you can afford, what your options are, and where there’s room to grow. But before you request that pre-approval, there are a few things you’ll want to have squared away.

✅ 1. Budget, Credit,& Discipline

Getting pre-approval means your lender is going to take a deep dive into your finances. Get a head start by:

• Creating a monthly budget and sticking to it.

• Improving your credit score by paying bills on time and reducing any balances on your credit cards.

• Keeping credit utilization below 30% — high balances can signal high risk.

• Avoid applying for new credit or loans if you don’t absolutely need them unless you are obtaining a secure credit card to help improve your postive scores.

These small moves show lenders you're serious and financially stable.

✅ 2. Maintain a Steady Income

Lenders want to see at least two years of consistent income in the same field or industry. If you’re self-employed, be prepared to provide tax returns and bank statements to show steady cash flow.

✅ 3. Tackle Debt Strategically

A high amount of debt can hurt your buying power. Work on:

• Paying down existing loans like auto, personal, or student debt.

• Keeping your Debt-to-Income (DTI) ratio under 40%—the lower, the better.

This helps position you as a stronger, less risky borrower.

✅ 4. Stay Current on Taxes

Make sure you’re up to date on all taxes owed to the IRS. Unresolved tax issues can complicate or even derail your mortgage application process.

✅ 5. Build the Habit of Paying a Mortgage

Want to know what your monthly mortgage might feel like? Start setting aside your estimated monthly payment now. This habit:

• Prepares you mentally and financially.

• Helps build extra savings.

• Shows you where adjustments might be needed in your budget.

  
  

✅ 6. Save, Save, Save

You’ll need funds for:

• Down Payment - typically 0-20% depending on the loan program.

• Home Inspection - Typically range $400-$800 and are useful to get a full assessment of the current condition of the home.

• Cash to Close, which includes closing costs and any prepaid items like home insurance and taxes.

The more you have saved, the more confident and competitive you can be when the time comes to make an offer.

📆 Ready to Take Action?

Ready to Buy or Sell? Start Here

The best part? You don’t have to figure it all out alone. Whether you're just starting to explore the idea of homeownership or you're ready to hit the ground running, I'm here to help guide you every step of the way.

👉 Schedule a FREE Buyer or Seller Consultation Today

Let's sit down, make a plan, and get you one step closer to your dream of owning a home.

💬 Have questions about pre-approval or want tips tailored to your situation?

Drop them in the comments or text me anytime at 254-307-1596

Getting a your financial house in order is important part of your journey to making your homeownership dreams a reality. Let’s get started. Reach out now to Alex Watson, your trusted Realtor®, at 254-307-1596 or connect with me on social media @WatsonInvestRealtor. Let's get you into your dream home!

Ready to Buy or Sell? Start Here