Buying a Home? Step One : Understanding Your Budget

The first step in any home search is determining how much of your monthly and annual income you’d
like to allocate toward your total cost of housing. Evaluating your financial situation, calculating your monthly
expenses, and understanding your credit score are all important factors to consider. It’s important to
start off on the right foot by getting a firm handle on your financial situation.

To determine your budget, start by evaluating your current financial landscape. This includes assessing
your income, savings, and any outstanding debts. Remember, the monthly cost of homeownership isn’t
just the mortgage payment – you’ll also need to factor in costs like property taxes, home insurance,
maintenance, and possibly, HOA dues. Don’t worry, your real estate advisor should walk through these items with you when conducting your Buyer Consultation meeting.

Next, calculate your monthly expenses, which include not just your current rent payment, but also
utilities, groceries, insurance, car payments, and other recurring costs. Be honest about your spending
habits.  It’s better to overestimate your expenses than to underestimate.

From here, set a rough number for the total figure you’d be comfortable spending every month on
housing. That will be a good place to start when speaking your real estate advisor, as well as a mortgage advisor.

Lastly, understanding your credit score is crucial. Your credit score can significantly affect your mortgage
interest rate. If your score is high, you’re likely to get a better rate, which can save you thousands over
the life of your loan. If it’s low, you might want to spend some time improving it before you start house
hunting.  It won’t rule you out of a home purchase, but it will affect your purchasing power.

Consider scheduling a meeting with your CPA at this opportune moment to discuss and assess your financial situation. By gaining a clear understanding of your finances, you can proceed with confidence in the knowledge that your ideal home, when found, aligns with a budget that ensures stress-free homeownership.

In the meantime, happy hunting!


Check out this article next

50 Things a Buyer's Agent Does

50 Things a Buyer's Agent Does…

In light of the current media coverage on significant class action lawsuits concerning real estate commissions, it's important to understand the value that a Buyer’s…

Read Article
About the Author