Buying a new home is one of the most exciting things you’ll ever experience. But as you begin to look at the housing market, you may start to wonder how much you should spend on a house.
While your income is one of the deciding factors when determining how to budget for a house, it’s not the only consideration. Think of longterm needs from a house and whether or not you’re open towards moving again if your finances permit it.
The home buying process has multiple factors, from budget to monthly spending. Whatever you plan to spend, be sure to know ahead of time exactly how to budget for a house so you’re prepared throughout the entire process.
How To Budget for a House
The first step when deciding how to budget for a house involves considering your finances. If possible, use a spreadsheet to keep track of your finances when creating a budget for buying a house.
1. Determine Monthly Income
Begin by recording your net income, or the amount of money you take home every month, after taxes. Be sure to account for things such as benefit contributions, retirement plans, child support, or any other monthly deductions that come from your paycheck.
Once you know the amount of money you have every month, you can begin to deduct expenses.
2. Log All Expenses
Food shopping, car maintenance, and utility bills are just some of your monthly expenses. Make a list of all your monthly bills and what the amount is. Be sure to account for spending money, especially for birthdays and holidays.
Take a look at your bills and determine if any bills are due to be paid off such student loans or credit cards. Also, take note of any bills that you may be able to reduce, such as a cell phone payment or a cable bill.
3. Set Expectations
Once you know your monthly expenses and your monthly income, you can sit and determine how much money you have leftover, and what portion of this can go to a mortgage.
Set realistic expectations. Remember that one house buys another, and as your equity in a home increases, you’ll always be able to move again.
Take into consideration the expense of home repairs and maintenance when creating your budget.
In addition, be sure to talk to your mortgage broker about the amount of money needed when you purchase your home. You’ll need to have money saved to transfer funds for closing, consider this as well when creating your budget.
Be Mindful of What You Spend
Once you’ve created a budget and recorded your monthly expenses versus what you take home every month in your paycheck, you’ll be able to determine what a comfortable mortgage payment will be for your new home.
Look at the homes in your price range. If you feel the need to spend a little more, be sure you can account for the money elsewhere.
This may involve cutting expenses and prioritizing where your money is spent, something crucial when figuring out how to budget for a house.
An easy way to save extra money is to avoid eating at restaurants. Opt for home-cooked meals to put money aside every month.
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