So, you’re thinking about buying a home. That’s great! You’ve got a lot to think about, especially when it comes to finances.
You may wonder what monthly house payment you can afford as you look to buy a home. It’s actually pretty easy to find out!
1. Begin Looking at Your Budget
If you don’t already have a monthly budget or regularly keep track of your finances, take some time to look at your bank statements, credit card statements, and/or checkbook.
Tally up what you normally spend in a month and separate your bills into necessary and optional expenses.
Necessary bills include:
- Gas for your car
- Loan and/or credit card payments
Optional expenses are things like:
- Fast food
- Getting your nails done
- Going to the movies
2. Budget in Your House Payment
Next calculate what you should budget for your monthly house payment. A common recommendation is to budget for a mortgage payment that is 28% or less of your monthly income.
Monthly Income x 0.28 = what you should budget for a monthly house payment
Your actual payment may be more or less, this is just a good way to start planning.
Add together your monthly necessary expenses and your estimated monthly house payment to get a good idea for what you will need to cover each month.
3. Keep Your Budget System Going
As you get ready to buy your first home, keep a system that works for you. A lot of banks offer online banking as a way to keep track of your finances.
Apps like Mint also exist to help you keep track of monthly budgeting. Mint will show you what you spend, where you spend it, and alert you when bills are due.
A checkbook or excel spreadsheets work just as well. Remember to keep your receipts and write them down as the month goes by. Starting a system with your first home purchase will keep you on track as you continue to budget into homeownership! And if you prefer just to deal with cash, Dave Ramsey suggests the envelope system.