How to set a budget to buy your first home

How to set a budget to buy your first home

From Mathew Philip

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The we buy houses San Bernardino will help you on how to set a budget for buying your first home. When it comes to buying a home, everyone known the important rule:; you don’t have to purchase a house which is more than you can afford. But the affordability will tend to differ from one buyer to the next.

As at December 2020, the median sales price for a home in the USA was about $355,000 which denotes that, there are people who pay much more than that figure, while others less than that. Wherever your spectrum, it is like that a home will be one of the largest purchase which you are going to make.

To figure out the sweet sport of affordability needs more than having to get a pre-approval letter from the lender of the mortgage. If you are a first time buyer, you can be able to shop on the amount a lender is ready to advance, not taking into account other different expenses. It can end up setting you up for hardships financially and evening a foreclosure if not able to pay the monthly payments.

The 28% Rule can get you started

One of the easy ways of calculating your home buying budget is the 28% rule that dictates that your mortgage needs not be more than 28% of your gross income monthly. The FHA  - federal housing administration is quite generous, that allows consumers to be able to spent up to 31% of their gross income on the part of mortgage.  You don’t have to forget that, if you are having other debts, you have to consider them apart from the payment of the mortgage in determining the amount which you can afford.

The mortgage lenders look at the debt to income ratio of the prospective borrower when determining if they will lend money.  If for example it happens that your monthly mortgage payment falls at $1000 a month and you are having other expenses of about $1000, it means on the overall, your monthly financial obligations will be at $2000. If your gross monthly income is $6000, it will place your debt income ratio to be at 33%.

Home owning expenses that are beyond the mortgage

To get a pre-approved for a home loan is something which is quite important as a first step in the process of home buying but it is not the only consideration. A mortgage is not the only expense which you have that is recurring.

The homeownership comes with several other ongoing costs, which buyers need to anticipate. They include the insurance for homeowners’ utilities, the maintenance costs and the repairs.  The costs for maintenance alone might end up adding up. The lawn has to be cut, the snow has to be shoveled, and the leaves need to be raked. The buyers require considering the various taxes.

When it comes to the expenses, they can add up to your outlay monthly in a great way, and make the home that seemed to be quite affordable on paper to be expensive in real life.

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