Budgeting Tips for Home Buying. Budgeting is usually the first step that you take when you’re starting on your house buying quest. Therefore, you have to make sure that you do not start off on the wrong foot. To help you in this area, we have put together a few useful tips and guidelines that you should follow if you want your house buying journey to go in the right direction.
Decide on a Price Limit
You should know that the amount that your bank has pre-approved for a mortgage is not what you can spend entirely on buying the house. There are several other expenses and payments that you should take into account before you decide on a price range for your new home. Therefore, do not let the inflated pre-approved mortgage amount trick you into going for a house in a higher price range. For example, if your bank has pre-approved a mortgage loan worth $400,000, it doesn’t factor in your personal expenses or your overarching financial obligations.
Use an online mortgage calculator, as such a tool can give you a fair picture of what your monthly mortgage payment will be. You will have to enter data such as loan terms, sale price and interest rates, and the online calculator will provide you with quite an accurate estimate of your monthly mortgage payments. You can now decide on a price limit to guide you in your house search.
Know Your Income
To really know what you can or can’t afford, it is essential that you factor in all your sources of income. So, start by adding up all of your own as well as your spouse’s income sources.
For a more precise illustration, let’s look at an example of a typical dual-income household.
- Wife’s salary: $5000
- Husband’s salary: $7000
- Interest income from a fixed deposit: $400
Total Monthly Income = $12,400
Know All Your Expenses
It is essential to know where your income is spent so you can estimate how much you can spare to contribute towards the mortgage payments.
Start by writing down all your monthly expenses. Everything from rent, food, clothing, recreation, medical to savings, and even charity should be accounted for to reach a figure for your total monthly expenses.
Factor in Home-Ownership Costs
These will include all the real estate costs such as closing costs, property insurance, and taxes along with repair and maintenance, spending on home décor and furniture as well as on lawn care. You may also factor in the increased utility bills and the transportation expenses that come with more square footage and the property’s location away from your place of work.
As a rule of thumb, experts suggest that the housing payment should not exceed 25% of the amount of your total take-home income and that you should acquire a 15 year fixed rate mortgage to maximize your savings.
All in all, the useful tips mentioned above should be kept in mind when you’re deciding on a home buying budget. If you’re looking to buy a house anywhere in Orlando, Florida, you can acquire our dedicated services to avoid any mistakes in the budgeting process and make the process seamless for yourself.
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