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How to Budget for a New Home

By on February 28, 2017
How to Budget for a New Home

When you start thinking about buying a new home, it can be tempting to go all celebrity style and ask to see multi-million dollar homes. That can be a really fun game to play, but not when you’re actually looking for a home. If you start off that way, you’ll only be disappointed when you get around to the places you can afford.

Money Matters

But if you’re like almost everyone else, then you’ll want to start off looking for a home by not looking for a home. Your first step should actually be the dreaded budget. Of course, this isn’t most people’s favorite way to spend a Saturday evening, but if you ever want to move into your own home without winning the lottery, this is the way to do it.

First step is to go through your existing budget and find out how much you can save. If you don’t have a current budge, make one! There are some basic categories, including rent, phone, internet, groceries, gas, car payments, clothes, charitable donations, and recreational activities. If you have more, or other categories, make them up however you see fit.

Then work out what money you don’t spend every month and decide how much of that you can save. Your living expenses, like rent, shouldn’t be more than 25% of your monthly income. This can be impossible in some places, like California, but get as close as you can.

Then you simply figure out how much you want to put down. You can use a mortgage calculator to figure out your monthly payments based on how long your mortgage will be, along with other factors. Remember that you’ll have new costs, like homeowner’s insurance and property taxes to deal with as well.

Start Saving

There’s a good chance you’ll need to take some time to save up the money to buy a house. That’s actually a great opportunity to practice delayed gratification. In the meantime, though, you won’t be living in your dream home. If the place you’re staying in now it eating up more than 25% of your monthly income, you may need to downsize. If that’s the case, consider renting a smaller apartment for the time being. The savings from rent and utilities alone will make the trip to home-ownership faster and smoother.

Ask for Help

When you think you have enough of a nest egg to make a move on a house, ask for help. You’ll have better luck finding a place you can really call home if you talk to a professional. You can change your own oil, but buying your own home is a whole different ballgame. This goes double if you’ve never bought a home before!

There are benefits to hiring a realtor, like that they’re held to stricter standards than many people realize, and the best part is that they have to know what those standards are. An average Joe selling their home may have no idea that they’re required to tell you about lead in the paint. Realtors also have access to homes that aren’t publicly listed, so you can find places you wouldn’t have known about otherwise.

Buying your first home is an exciting step. Make sure you plan accordingly!

Scott Huntington is a writer from central Pennsylvania. He enjoys working on his home and garden with his wife and 2 kids. Follow him on Twitter @SMHuntington

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