Buying a home is one of the biggest purchases that one will make in one's lifetime. Undertaking a project this big needs careful thought and planning. To ensure a smooth process of being a new homeowner, one must have a budget for this.
Creating a budget that incorporates a purchase of a home starts with calculating income, expenses, and other factors that will affect how much one can afford to buy. Reviewing one's current household budget is a good start to know how much money one will have left after the purchase.
One should ensure that one would still have enough money to cover the new mortgage payments without sacrificing one's quality of living. As a rule of thumb, mortgage, real estate taxes and home insurance should not be more than 30% of the annual income. It would be a sad thing if at the end of it, one will be living in one's dream home already but will also be living from paycheck to paycheck.
To create the budget, one must also calculate how much can be paid as down payment in order to determine the amount or percentage of financing needed. This in turn, will indicate how much the mortgage payments will be. In general, down payments range from 5% to 20%. Other costs one will shoulder in buying a house are property tax, insurance, private mortgage insurance, and closing costs.
It would also help to make a list of the things that one wants in the new house to know how much would the things one will be buying or adding to the house cost. The list can be made in an order of highest priority to lowest so that it will be easy to take items off the list if the costs get too high.
So that it would be easier to create this budget, one can make use of free online calculators. Here, one will just have to input one's income after taxes, basic living expenses, bills, transportation and entertainment expenses, savings accounts and lastly, the estimated housing payments (down payment, mortgage, interest rate, other fees). The calculator will tally up the amount of what will remain from your income after you have bought the house.
Nick Greene has been writing articles about purchasing new homes for the past two years. He also enjoys writing about NYC neighborhoods, specifically helping people decide where to live next .