How to Budget When Buying Your First Home

Buying First Home

Buying a house is one of the biggest, most important, and most expensive purchases many of us will ever make in our lives. For that reason, having your finances in order and approaching the purchase with a coherent game plan is absolutely crucial. 

Know Your End Goal

Before you can really begin budgeting for the house of your dreams, you need to know what that house looks like, where it is, what condition it’s in, and most importantly, how much it costs. That means doing your research and, potentially, recalibrating your expectations.

Of course, you also have to know exactly what resources are at your disposal. One helpful tool anyone can use is an online house payment calculator. This will help you get an idea of just how much you can afford to pay for a mortgage based on your current income and the cost of the approximate value of the properties you’re looking at.

Pay Off Any Old Debts

Having outstanding debts is like carrying a weight on your back. It slows you down, keeps you from making progress, and just generally makes life a lot more difficult. That goes double when you’re trying to save up enough money to buy a house.

Paying off old debts, or refinancing them to make more manageable, is helpful for two big reasons. First, having to set aside less money for debt payments means you have more money to invest in a property. Second, reducing debt helps improve your credit score, which in turn can make it easier for you to negotiate a good mortgage with reasonable repayment terms and low interest.

Eliminate Extra Costs

Buying a house is expensive in more ways than one. In addition to making a down payment and continuing to make mortgage payments, you also have to worry about utility bills, maintenance and repairs, property taxes, and insurance.

With all that account for, it pays to give yourself as much wiggle room as possible. That means eliminating extra and unnecessary expenses as much as you can. In other words, try cutting down on needless expenditures, such as entertainment events, restaurant meals, impulse buys, and the like. At least for the time being, if it’s a distraction or impediment to buying a house, you don’t need it.

Consider the Future

It’s a tragedy that affects countless people every year. A sudden emergency or unexpected job loss results in a serious decrease in their savings or income, making it hard or even impossible to continue paying their mortgage or other bills.

While there’s no way to fully insulate yourself from unpredictable events, you can prepare yourself in a way that makes them easier to deal with. In addition to whatever money you set aside for house payments, try to squirrel away some extra in order to build up an emergency fund. It might seem like a waste now, but it can be a lifesaver in the long run.