Buying a new home can be stressful when it comes to determining what your budget should be. Whether you are a first-time home buyer, need room to grow or want to downsize, figuring out how much you can reasonably afford can be tricky, but it doesn’t have to be! These simple tips and budgeting tricks will help you determine how to make your homeownership dream a reality.
Before starting your journey into homeownership, it is important to be sure that you and your family are prepared physically, emotionally and financially. A good way to assess how ready you are is to start by asking yourself these helpful questions:
Once you have evaluated what’s best for your family’s needs, the following simple steps can help you get the ball rolling.
Ready to keep learning more about preparing to buy a home? Check out these three items to consider:
Once you calculate your current debt-to-income ratio, you’ll know how much you spend each month and how much you will be able to save. You can create a budget sheet to estimate the increased expense for a monthly mortgage payment and any other costs like those mentioned above, and start to save that amount each month. As you do so, you may find you need to make adjustments to your budget over time. Creating a budget sheet and sticking to it will make the home buying process smoother for you and can help your home consultant guide you toward the types of homes you will be interested in!
You can easily create a budget by splitting all your bills and other costs into categories such as utilities, travel expenses, food, donations, etc., and writing down what you spend each month for each individual category. Simply sit down and write your income at the top of a piece of paper, and then determine your recurring expenses. We have even created a simple budgeting worksheet to get you started!
With two sections for estimated cost and actual cost, which will help you see if you are spending more than you realize on certain things, our budgeting worksheet includes the following items and categories for you to consider:
These examples may be just a few of the expenses you need to think about! Each category also has space for additional items so you can tailor the worksheet to fit your personal situation.
Start the worksheet by writing your starting account balance, starting debt and monthly income in the appropriate spaces at the top of your page. From there, you will enter your expenses to determine how much you spend on all the items!
Your credit score is another factor in determining the type of loan and the interest rate you may qualify for. Pulling a credit report yourself allows you to make sure there are no errors that might affect financing. If there are errors on the credit report, you can work on having them corrected prior to applying with a lender for a loan.
You can also work to improve your score or build your credit if you have a short or no credit history. Check out our ultimate guide to building your credit for some great suggestions on how to start when establishing credit.
Debts you may have could include credit cards and auto loans, as well as student and private loans, medical bills, and financed or rent-to-own items such as furniture sets. All of these can add up to your overall debt, and any late or missed payments can affect your credit more than you may realize. It is important to reduce delinquency that may appear on your credit report. Of course, it helps to have a report without any history of late payments, but the essential step is paying delinquent balances prior to applying for a loan.
You can also implement these strategies that make paying your bills easier and help ensure you’re less likely to miss a payment.
If you are dreaming of a new home in your future, creating a budget sheet will give you a solid plan on how to reach that dream and make the home buying process easier. You’ll also strengthen your financial fitness and feel more prepared for the journey.
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