So you're dreaming about buying a house.
I hope you have a good handle on how much house you can afford. If you have doubts about how much you can afford to pay for a home, I suggest you read our last letter on the topic here: So you're dreaming about buying a house. I hope you have a good handle on how much house you can afford. If you have doubts about how much you can afford to pay for a home, I suggest you read our last letter on the topic here: /how-much-house-can-you-afford. Assuming you are comfortable with your plan to purchase, you will benefit from looking at your budget once you are in the house. Here are some tips you may find helpful: 1. Know your current numbers. If you have been keeping a budget, this step is done. If not, before you commit to the home purchase would be a great time to start. Sum up your take home pay for the month. Then list all of your expenses. If you haven't been tracking your spending you may need to for a couple months or so to verify your numbers. You are likely to be surprised.
2. Calculate your new house payment. If you have a specific house picked out your realtor or mortgage broker should be able to provide you everything you need. If you are still in the dreaming and looking phase – make a good estimate. Here is the link to a mortgage calculator you may use. Mortgage Calculator Remember, we want a monthly payment of less than 25% of our income on a 15 year note with 20% down. It is also important to know that taxes and insurance vary greatly by location. The above calculator has fairly low assumptions for taxes and insurance that you should probably change. In central Texas a very rough estimate for monthly taxes and insurance is $250 a month per $100k of purchase price of the home. Based on this estimate a 300k home would have $750 /month in taxes and insurance combined. Some urban areas may be higher, and rural areas may be lower. 3. Update other living expenses. This particular step will be a little challenging. Here is a draft list of categories to consider. It may be beneficial to ask the current homeowner about some of these costs, or research them on the web. Either way, it would be a shame to figure out how much these things will cost you after you've already moved:
Utilities (Electricity, Gas, Water)
Transportation (if moving further from work)
HOA dues if any
Pest Control (semi-optional in Texas)
Monthly Savings for potential repairs
4. One Time Moving Expenses. These may vary greatly. If you and friends will be loading trucks and trailers yourself the cost may be minimal. If not, you should get a couple estimates ahead of time. There will also be a number of other one-time costs. If at all possible, better to save for these rather than put them on a credit card. Some examples to consider:
Outdoor items (BBQ, swingset etc..)
Home ownership can be a great blessing. If you buy a home that is too expensive or without considering the additional costs you can find yourself house poor for quite some time. If you believe you are ready to start looking for a home - don't do it without a Realtor. Julie Burton is a good one: https://www.facebook.com/JulieBurtonRealEstate I hope these points have been helpful. If you'd like to talk to someone about budgeting and other financial management, use the link below to schedule a complimentary consultation..