How to Set a Realistic Budget for Buying a Home

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Setting a realistic budget is incredibly important when you buy a home. A realistic budget is different than the amount you are pre-qualified for.

For example, just because the bank qualifies you for a loan amount of $400,000 doesn’t mean you can afford to make that monthly payment. You don’t want to become a slave to your mortgage payment.

Before you hit the streets looking for houses, sit down and make a list of your monthly expenses. Then, come up with a number you are comfortable spending on your mortgage payment in addition to your regular monthly expenditures.

A good rule of thumb is to take one-third of your monthly gross income and set that aside for your mortgage payment. It is also a good idea to have six to nine months of mortgage payments saved in the bank, plus a little extra to take care of any home repairs you might need to make.

Your mortgage payment should be about 1/3 of your monthly income.

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