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Creating your budget as a first-time homebuyer

January 14, 2019

Buying a new home is one of the most important purchases a person will make in his or her life - so it goes without saying that it certainly isn’t an impulse buy. To keep up with the various expenses that go along with owning a new home, your personal budget needs to be in check. Below, we offer tips on things to consider when you’re creating your budget for your first home. 

Evaluate your current housing budget and determine your price range

What do you currently spend on housing? Are you comfortable with it? How does your current budget impact your future desires or wants – such as traveling or starting a family? Many financial experts recommend spending no more than 30 percent of your gross monthly income on housing. That also includes mortgage interest, property taxes and potential maintenance. Everyone’s circumstances are different, so you must find a percentage that works for your budget. 

Figuring out this percentage will then help you determine an appropriate price range. There’s a general rule of thumb for that, too. Take your annual gross income and multiply by 2.5. Keep in mind that, ultimately, your buying power will depend on how much you have available for the down payment and how much a lender will agree to loan you. 

Assess your spending habits 

Small purchases add up over time, and it can be surprising how much you save when you start paying attention to them. If you sit down and document your spending, you’ll likely find areas you can cut out. Taking a few months to implement these changes will eventually decrease your debt and increase your budget towards buying a new home.  

Consider the down payment

Saving for the down payment is the most challenging part for most first-time homebuyers. First-time homebuyers have to count on their savings as the principal resource for a down payment. Prepare by planning to set aside funds on a regular basis that specifically go towards the down payment for your new home. Pro tip! Getting pre-qualified is a great way to find out how much you’re going to need to save for the down payment. 

We understand that budgeting for a new home can feel complicated and overwhelming. But, the Grant & Co. team is here to answer your questions. Our recommended lenders will guide you every step of the way – from pre-approval to finding the mortgage that's right for you. If you have other questions or concerns, feel free to chat with Kristy by calling or texting 901-713-1070.