Budgeting for a Home Purchase

Between one-time expenses like your down payment and closing costs, and ongoing payments like property taxes and homeowner’s insurance, it’s hard to determine just how much is enough to budget for your home purchase. In this blog, we’ll cover the ins and outs of budgeting to buy a home. 

Here’s what Shaulonda Jones–one of NeighborWorks® Toledo Region’s HUD-certified Housing Counselors–says about the importance of budgeting to purchase a home. 

"Preparing a budget will help you prepare for homeownership by providing you with a roadmap of how you will reach your goals. Your budget will allow you to assess how your money is spent. This will assist you with debt reduction, saving for a down-payment and closing costs, and saving for the unexpected. As a homeowner, you will be responsible for paying your mortgage and covering the cost of maintenance and repairs. Budgeting will allow you to have control of your finances which will reduce financial strain and assist you in having a successful homeownership experience.” 

The first step to determining your approximate home-buying budget is to estimate the price range that you can afford. FreddieMac advises buyers to calculate their price range by multiplying their annual gross income by 2.5 to start.  

Once you’ve calculated an initial price range, consider your credit history and score. Your credit score can impact how much you might spend on your down payment and might adjust your interest rates or loan terms. Shaulonda says:

“Your lender will provide a mortgage amount that you qualify for. The approval amount provided by your lender does not always take into account other financial obligations that you may have, for example tuition for your children. Your budget will determine how much you can realistically afford to pay for a home."

As Shaulonda shared, it's also important to keep in mind emergency expenses. Saving for the unexpected, like surprise home repairs, can reduce financial strain.

In today’s economy, so many factors impact how exactly one builds a budget. For personalized, catered financial coaching, contact us to set up an appointment with a HUD-certified housing counselor.