Homebuying With Guro: Know What You Can Afford!

Have you ever asked yourself, “Where did my money go!?” When you’re buying a home, it’s essential to know what you can afford. So if you’re truly serious about becoming a homeowner, it’s time to get serious about that budget too!

Do you know where your money go?

Based on your income, debt, assets, and credit score, a lender will tell you how much you’re pre-approved for and your approximate monthly mortgage payment. The pre-approval is based on a maximum debt to income ratio giving room for other monthly expenses. But a lender doesn’t know what your budget is. Do you?

Your budget should include all of your monthly expenses, including your mortgage payments. For example, a budget would include food, your car payment, insurance, your gym membership, phone, wifi, daycare, etc. 

Make a budget!

To get a total picture of all your monthly expenses, print out your bank statements from the last 6 to 12 months and use that to make a budget. Then add in your monthly mortgage payment and think - is that something you're comfortable with spending every month? Is it something that you can afford?

And remember - just because you’re pre-approved for one amount doesn’t mean you have to spend it all. Some homebuyers will be pre-approved for more than they want to spend monthly on their mortgage payment, while others might have to adjust their expectations to what they can afford. If you’re moving from a condo to a single-family home, you’ll have to budget for higher utility costs, and if you spend your money like there is no tomorrow, maybe it’s time to put the breaks on?

Budgeting nowadays is easier than ever. You can find budget templates online, in your online bank account, or use the budgeting template I made for you. Just click on the link below to download it! 

Any more questions about budgeting? Send me an email at guro.midtsund@exprealty.com

Guro Midtsund is a Realtor with eXp Realty, LLC in Birmingham, AL. This information is deemed reliable but not guaranteed.