4 Ways to Budget before Buying Your New Home


Purchasing a home is one of the biggest expenses you can make in your lifetime. The key to being able to afford taking on such a large financial responsibility is properly planning and budgeting prior to purchasing. These four tips will help you budget so you can afford your home purchase when the time comes.

Evaluate Your Financial Situation

The first real step toward creating a reliable and trustworthy budget is to evaluating your current financial situation.

This means writing down every single cent that you earn and spend over the course of a month. When you write it down, it’s much easier to identify where your money goes and where you can make cutbacks.

As you write, ask yourself the following questions:

· How much do I earn?

· How much do I spend?

· Of my spending, which are fixed expenses?

· Of my spending, which are variable expenses?

· What are my assets and how much are they worth?

These questions aren’t always easy to answer or understand, so make sure you take time to really evaluate your financial status.

Once you have this plan, you’ll see exactly how much money you have left at the end of each month, if any, and how much you can afford to spend on a mortgage.

Budget Bills to Get a Better Credit Rating

Before you budget to buy a house, you need to take stock your bills and credits cards and make sure you’re able to pay them in time. Done correctly, this will increase your credit score.

A good credit score is an essential part of purchasing a new how as it helps prove that you’re a reliable borrower during the loan application process. Some of the best ways to ensure your credit score is high are:

· paying your bills on time

· reducing your credit balance to below 30% every month

· having three or four credit accounts that you successfully pay off on time every month

At the very least, make sure you don’t have any overdrafts or late payments within the three months or so that precede submitting your loan application.

Make Small Changes to Decrease Debt

As well as ensuring that your credit rating is high, you should try to cut as much debt as possible before investing in a property purchase. Outstanding debts are the last thing you want to have when you take on the responsibility of a mortgage.

Set feasible monthly goals for saving cash. Even if the changes seem small, the bigger picture could really make a dent in your debt. Can you cut out the following to save?

· Stop buying coffee at expensive shop. Those who buy a coffee every weekday may spend $780/year when paying an average of $3/cup.

· Stop eating lunch out. Those who eat lunch out three times a week may spend $1,500/year.

· Stop smoking. Those who smoke a pack a day may spend $1,638 per year.

Before you enter into a mortgage agreement, it’s important that you have eliminated as much financial burden from your budget as possible so that you can focus on purchasing your property. So look for little ways to save and pay off debts as quickly as possible.

Don’t Forget to Budget for Emergencies and Additional Expenses

One of the biggest mistakes people make when trying to budget is to stretch things so far that there’s no room for anything unexpected that might pop up. It’s all very well creating a budget which allows you to adequately pay for your new property mortgage, but if you don’t have any breathing space for emergencies, things could become extremely stressful indeed.

Try to free up a small amount of money each month that goes into a savings account so that if your car breaks down, your oven breaks, or you need to fly across the country to visit an ill family member, you will have the funds available to deal with this.

Also don’t forget the additional costs that come with purchasing a new home. You may need to set aside additional money for:

· Home Insurance – Get a quote at http://homeownersinsurance.com/.

· Property Taxes – Get a quote from the county’s property appraiser site.

· Homeowner Association Fees – Learn how HOA fees are determined.

Setting aside the additional cash will make you far more prepared to make the big purchase — even if emergencies arise.

Clever budgeting will make your money stretch much further than you imagined, leaving you with more options, less stress, and a healthy relationship with your bank manager. It takes a lot of discipline to follow a strict budget but the results are well worth it if it makes it possible to purchase your own property.

Blog post provided by Dylan Adams