When buying a home, you’ll need to establish and stick to a budget. This will be important during the entire process from beginning to end. Below are tips that will show you how to put together a budget that works.
Begin conservatively. Know how much you have to spend on your new home. If you are selling a home, you can use the money you receive for the new down payment or closing cost.
Make a list of all the costs you are likely to incur. This will show you how much money you need. Next, figure out how much you currently have to put down for the various costs associated with buying a home. This will enable you to figure out how much more you’ll need to make it happen.
Start out small. Many people purchase starter homes in the beginning, then work their way up to larger houses. You need to buy the house you can afford. Springing for a larger one may only cause you a great deal of debt and stress later on. Starting out small allows you to continue saving money while paying for your new house and all your requisite bills.
Create a wish list. Know what features you want in your new home. List those you absolutely can’t live without and aren’t willing to compromise on, then list those that are important, but that you can live without. Prioritizing your wish list makes it easier to weed out listings that don’t meet your specifications before you even look at them. It also helps you narrow down your options.
Think about the down payment. Figure out how much cash you’ll have for it and don’t touch that money. If you can, keep adding to it. Some people aren’t able to do this, but those that are save money in the long run. Remember, the more you pay down, the less you owe. This makes your monthly house payments lower as well. The down payment will typically range between five and 20 percent of the purchase price.
Figure out what your mortgage payment should be each month. The standard rule is that the monthly payment should range between 25 and 33 percent of your gross income. Once you know what your mortgage payment should be, you can then figure out how much you can afford to pay for a home in full. This will help you narrow down the choices.
Don’t look outside what you can afford. Stay within your price stipulations. Searching outside your range will only tempt you to buy more house than you need. Factor in all the closing costs. You’ll need to have the money up front to pay for them. Once you have all the money, put it in a special account. Building a savings account along the way is a good idea. Don’t touch this money until it comes time to buy your new home.