Purchasing a home is one of the biggest financial decisions one makes in their lifetime. Buying your first home can be an exciting experience, so it’s a good idea to have a solid plan in place. As exciting it can be to own a home, it can also be a burden without a plan. Thus it is imperative to ask yourself, how much house can I afford? How does one determine that, is by looking at their finances and expenses.
The first thing to look at is your monthly income, whether it’s individual or combined. Once you have established what that number is, look at your expenses. Ask yourself the following questions:
- What’s my monthly Rent?
- How much is my gas bill?
- How much is my light bill?
- What am I paying for the internet/cable/tv/phone etc…
- How much of those expenses am I sharing if any?
- What am I spending on average for groceries?
- How much of it am I spending on entertainment things such as movies, going out to eat, etc….
After all the expenses, how much do I have left to save towards the down payment, closing costs as well as reserves? Create an excel spreadsheet to help you keep track of your finances.
Also, besides a mortgage payment and utilities, there are other costs to consider . Those costs are property tax, home insurance, and of course maintenance.
Maintenance is part of homeownership, which is also a cost. Having reserves to help with those costs is an important part of maintenance. For example, if your furnace breaks tomorrow, do you have reserves for that? If there is roof damage that’s not covered by your insurance, do you have the funds for those repairs?
Those are some of the things to consider when looking to buy a home. Want to know how much house you can afford, give me a call today and let’s chat!
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