Thinking about buying a new homesometime soon? Whether you’re buying your first house or going house-shoppingfor the tenth time now, you need to know how to budget for a house before youget started.
The average home costs a shade over $200,000 right now. But you can obviously buy one for a whole lotless or a whole lot more than that.
It’s what makes budgeting for ahouse so important. The last thing you want to do is end up in a home that youcan’t actually afford and be what’s called “house poor.” That’s no way to live your life!
So, what’s the best way to go aboutbudgeting for a home? Well, there are certain steps to buying a house that youshould be prepared to take.
Here are the seven steps you shouldwork your way through while figuring out how to budget to buy a house.
1.Begin by Taking a Close Look at Your Current Income
How much money are you bringing inevery month right now? When you’re trying to figure out how to budget for ahouse, answering that question is the perfect place to start.
You should sit down and check outhow much income you’re generating each and every month. You should take yourown income into account as well as your partner’s income if you’re planning onbuying a house with someone else.
You might also want to think aboutwhat your income is going to be in the coming years. While you don’tnecessarily want to count your chickens before they hatch, you should be awareof what your income could be in the future so that you can take it intoaccount.
2.Jot Down a List of All Your Monthly Expenses at the Moment
Once you know how much income yourhousehold is generating, you should move on and look at all the expenses thatyou currently face. You should look back at your expenses from the last year ortwo to see how much you’ve traditionally spent each month.
This should paint a clear picture ofhow much of your income is being spent on everything from rent and food toclothing and entertainment. It’ll indicate how much wiggle room you’re going tohave in your budget for a mortgage as you move forward.
It might also show you some areas inwhich you can scale back to free up more money for a mortgage. You might besurprised to see how much money you can start saving every month by eating outless or canceling a few unnecessary subscriptions.
3.Consider Paying Down Some of or Even All of Your Personal Debt
The average person is walking aroundwith almost $40,000worth of debt in their name. If you have this much debt, it could limit yourability to buy a house that you really want.
With this in mind, you may want tothink about paying down some of your debt or even working hard to pay all of itoff before you buy a house. By doing this, you’ll give yourself so much moreroom in your budget for a mortgage.
4.See How Much Money You Have Set Aside in Savings for a Downpayment
There are ways that you can buy ahome in this day and age without putting down a big downpayment. You might beable to get away with putting down a downpayment of just 3% in some cases, andthere are even some mortgage lenders that’ll allow you to take out a mortgagewith almost no money down.
That being said, you’re going tohave an easier time qualifying for a mortgage when you have a downpaymenthandy. You’re also going to have an easier time buying a bigger house whenyou’re able to put a downpayment down.
You should decide how large of adownpayment you can afford to put down and factor that into the equation whenyou’re coming up with a mortgage budget.
5.Think About How Much Money You’ll Have to Save Up for Maintenance on a Home
When you buy a house, you’re goingto have to pay for more than just the house itself. You’ll also need to pay tomaintain it every single month.
If you’re going to be buying a newerhouse, this might not cost you a fortune. But if you’re going to be buying anolder home that needs some work done to it, maintaining it could be moreexpensive than you might think.
You should try to calculate how muchmoney you’ll need to maintain a home. It’ll help you avoid buying a house thatyou’re not going to be able to keep up with financially.
6.Work With a Mortgage Lender to Get Preapproved for a Loan
This is easily one of the mostimportant steps to buying a house. Prior to house shopping, you should alwaystry to get preapproved for a mortgage through the best home loan provider in your area.
You might think that you can spend acertain amount of money on a home based on your own budgeting. But a mortgagelender can tell you what they’re actually prepared to give you so that youdon’t fall in love with a house that’s way out of your price range.
7.Start Shopping Around for a House
After you’ve done everything elsethat we’ve talked about here, you’ll be ready to start shopping for a house!With a house-buying budget in your back pocket, you’ll be able to find a homethat you can afford in no time at all.
KnowingHow to Budget for a House Will Stop You From Overspending on One
As we alluded to earlier, it’s nofun being “house poor.” You want to be able to enjoy living in ahouse, not dreading the due date for your mortgage every month.
You can steer clear of puttingyourself in a position where you’re “house poor” by learning how tobudget for a house. It’ll make the house-shopping process so much easier thanit would be otherwise.
Check out the other articles on ourblog for more tips on buying a home.