One of the first steps any buyer should take when beginning their home search is to set a budget. If you have never purchased a home before, this is a lot easier said than done. The process of setting a budget takes time and careful consideration. One cannot just simply pull a number out of thin air because it sounds reasonable to them. Far too often, people overextend themselves when setting their home budget and they end up regretting it later once they have moved into the home. Here are a few of the biggest aspects to consider when creating a home budget.
Don’t set budget solely based on mortgage approval amount
One of the biggest missteps for buyers is after they receive their mortgage approval amount. Although this can be helpful when creating your budget, it is generally a mistake to set your budget purely based on what you are approved up to. For example, a buyer may be approved for $400,000, however they may only be able to afford a home around $300,000.
Factor real estate-related expenses into your budget.
Another significant mistake that homebuyers often make is that they create their budget without considering other inevitable real estate expenses. For example, taxes, closing costs, home repairs and insurance all need to be factored into the budget. That is not even including other monthly expenses associated with being a homeowner, such as gas, water, or electric bills.
Account for unforeseen homeowner expenses.
If your goal is to live comfortably in your next home, you need to create a budget in which you don’t stretch yourself too thin. It is also important to factor in unforeseen expenses that go along with being a homeowner. Common examples of such include plumbing or HVAC maintenance/repairs.