Budgeting for New Home Purchase

Household budgeting will help you control and keep tabs on your income and expenses, when you’re in the market to buy a new home. Keeping tabs on your income and controlling your expenses is an important and necessary task. Staying on a household budget will help you avoid unanticipated home-related expenses at inopportune times. No one wants to buy a home and suddenly be in a pinch to pay the bills

If you prepare a budget, you’ll see where your money is coming from and where it’s going, which can help you curb unnecessary and unwarranted expenditures. Preparing a budget prior to looking at new homes can help you determine just how much you can afford in a home and a mortgage. Managing a household budget during home ownership can help to prevent financial disasters while helping you save for upcoimg expenses, needs and wants.

Developing a budget won’t take more than a few hours, especially if you assemble the necessary information before you sit down and start crunching the numbers. You’ll find that you are probably already operating under an informal budget and you’ll be thankful that you have taken the steps to formalize your budget. People who make and stick to a budget generally undergo less stress about money than those who don’t.

Here is a list of budget items and information you need to develop a budget:

• Housing Costs: Including mortgage(s) or rent, homeowners association fees, condominium assessments, property taxes, electric, natural gas or fuel oil, phones, cable or satellite TV, Internet service, water/sewer fees, trash removal, household supplies, lawn and garden services, maintenance, miscellaneous
• Transportation: Including car payments, licensing and registration costs, gas, maintenance, repairs, train, bus or taxi fares, miscellaneous
• Insurance: Including Homeowners insurance, flood insurance (or other additional home-related insurance policies, if required or desired), auto insurance, life insurance, health insurance, disability insurance
• Food: Groceries, dining out, other
• Entertainment and Travel: Movies, videos, music, sporting events, concerts, travel, miscellaneous
• Professional Fees: Attorney, doctor, dental, optical, hair, cosmetology, veterinary, etc.
• Clothing: New clothes, rentals, cleaning, tailoring, repair
• Loans and Credit Cards: Bank loans, revolving charge accounts, etc.
• Taxes: Federal, state, local, property tax, inheritance tax, estate tax, etc.
• Contributions and Gifts: Charitable contributions, church or synagogue contributions, birthdays, weddings, holiday gifts, etc.
• Savings and Investments: Bank accounts, mutual funds, stocks, real estate, personal property, etc.
• Legal obligations: Alimony, child support, liens, judgments, etc.
• School-related costs: Tuition, room and board, application fees, books, supplies, child care, etc.
• Other: Health club or gym fees, club or association fees and dues, postage, personal items, toys, summer camps for the kids, hobby-related items, other items not included above

Obtain a copy of your credit report. The major credit reporting agencies are required by law to send you a free report for the asking once a year, but you do have to request it. Having a copy of your credit report can help you get a clear picture of your total debt and monthly obligations and alert you to inaccuracies that could affect your ability to get a loan or get a favorable interest rate. You should correct any inaccuracies by writing to the credit bureau before you attempt to prequalify for a home loan.

In developing a budget, you should make allowances for price increases. (Gasoline, insurance and tuition seem to get more expensive every year.) Sweating the details of a budget can help uncover possible areas where you can trim expenses. Look for ways to save money on items you already buy and use regularly.

Most people spend more than they earn in income. Credit helps fill the gap, but interest on that credit can add up — and put you at a distinct disadvantage when you want to buy a new home. Getting a handle on the household budget can help you save money and reduce stress.

Once you develop a budget, you should set goals — both long-term and short-term. Get the entire family in on making and achieving these goals. An effective budget puts you in control of your money. And when you control your budget and finances, it could be the difference between being able to afford buying a new home and staying put where you are.

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