Buying a home is a big decision. Since it is something most people do not do too many times in their lives, it might be difficult to know exactly how much of a mortgage one can afford. Here are three easy steps to help you figure out how much of a mortgage you can handle without going broke in the process.
Create a Budget Your first step is to create a budget so you can easily see how much money you have coming in compared to your expenses. Be sure to include both short-term and long-term investments and other savings. Make sure you have at least six-months worth of mortgage payment sin your short-term savings in case you experiences and unexpected financial setback.
Account for Increased Expenses When you buy a home some of your expenses will increase and you will also have some new expenses that you have not had to worry about previously. You will need money for homeowner’s insurance, property taxes, utilities and possibly association dues on top of your mortgage payment.
Determine Your Optimal Mortgage Payment Your budget will spell out exactly how much money you have left over to pay your mortgage. If you cannot afford the mortgage payment you want to have, you will adjust some of your budget items. For example, you can look for ways to lower your car insurance costs or take a less expensive vacation.
Buying a home is exciting. But, you must be fiscally responsible about it. Before you jump into the home-buying process, have a plan, do your homework, and act wisely.