10/24/2016 0 Comments Home buying 101: What's my budget?Find this house, at our location in Verrado, here.
Ready to buy your first home, but have no idea where to start? Before you find the perfect home in the perfect spot & mentally move yourself in, you need to determine your perfect BUDGET. I know, the dreaded B-word! While no one loves talking budget, it is the very first & maybe most crucial step to buying a home. Creating a budget, will help you create the parameters of your search & ensure you don't get in over your head. There is nothing fun about being house poor. So where do you start? How do you create the budget? First, you need to write it out. Get out those spreadsheets, or just some paper & pencil. At the top, write down your total monthly income after taxes. Then, make a list of every single monthly bill you are currently paying. That would include, rent, car payments, insurance, water, electric, cable, internet, cell phones -- everything you are required to pay every month. Then, start adding the things that don't come as 'bills' but that are still monthly expenses, things like groceries, gas & eating out. Once you have it written out... Add it up. That will give you your monthly expenses. Subtract your monthly expenses from your total monthly income to determine how much disposable, or extra income you have each month. This is your 'flex' space & depending on how much flex space you like to have, will help determine how much you should put towards your new home. Trim the fat. If you're looking to move into something bigger & better, you might need to cut the fat in order to afford a bigger mortgage. Where can you cut back? Do you need cable? Is there a less expensive alternative? Can you brown bag your lunch a couple times a week? You're mortgage is really going to end up taking the same spot as rent, and a standard rule for lenders is that your monthly housing payment (principal, interest, taxes and insurance) should not take up more than 28% of your income before taxes. This debt-to-income ratio is called the "housing ratio" or "front-end ratio." Once you have these numbers all written out figure out what your 28% is. It is not recommended that your mortgage be more than 28% of your monthly take home pay, and if you can keep it less, do it! Run the numbers. Once you have a monthly mortgage number you're comfortable with its time to start talking to a lender. Or you can use a mortgage calculator to help determine your housing price point. There are all sorts of apps and websites that provide relatively accurate mortgage calculations, but know that none of them are as good as talking to a lender who can give you exact rates & parameters for your unique situation. Don't hesitate to call, it's their job after all! Stick with it. Remember this is a process. If this exercise shows that you need to save more for a down payment, make the changes necessary & do it. If it shows that you can afford more than you thought, well do a happy dance & get shopping! While rarely does anyone like sitting down to go over budget, its the only way to better empower your decision-making. Small changes will add up & make a big difference.
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Hi, I'm Amy, the resident blogger for Pinnacle West Homes. A licensed real estate agent, I've worked in the new home industry for over 10 years. While real estate is fun, I'm mostly a wife & mother & understand that you're not just buying a house, you're creating a home. If you have a question you can't find the answer to here, shoot me an email & I'll get you covered. We're happy to be on this journey with you. ArchivesCategories |