Buying a home should never be the prelude to bankruptcy. If you play your cards right, you’ll have plenty of money leftover. The key is to budget in the right way. Here are the best 4 budgeting tips to keep in mind when you buy a home. Making use of them in a savvy manner will keep you from having to go house poor.
1. Paying Off Your Debt
Being a first time home buyer can be a daunting experience. However, there are a few things that you can do to make it easier on yourself. The best way for you to avoid the prospect of going house poor will be to catch up on all of your other expenses. This means coming up with a plan to pay off any credit card debt and other bills.
Doing this will help you get enough money together in one place to enable you to afford an initial payment on a home. You will need to do all in your power to make sure that you don’t get locked into an expensive loan. The larger the amount you can save for this buy, the better the terms of your mortgage will be.
It’s a good idea to go through all of your current expenses to see which ones can be safely eliminated. The idea will be to get rid of them or at least get them fully under control. You don’t want to be in any kind of debt at the time you are hunting for a house. Paying off your debts is a key way to ensure you don’t become house poor.
2. Use the 28% Rule for Your Mortgage
Unless you can pay the full amount of your home in advance, you’re very likely going to need to take out a loan. But this is an area where you will need to be extra careful. The total amount of the mortgage loan that you agree to should not be more than 28 percent of the income that you take home every month.
If you deal with the Federal Housing Authority, you can adjust the figure to 31 percent. Sticking with 28 percent is a good way to keep your financial balance. Doing so will help you budget for your home payment while still being able to pay off your other expenses. This will keep you from developing house poorness.
3. If You Need to Downsize, Do It
Setting a budget for buying your first home is not a bad thing, it’s a smart and responsible financial plan. There is no reason why you should ever have to berate yourself for settling for less. You can take certain steps to get a deal you can easily prosper under.
The key to getting a good deal is knowing exactly what you need. You can then go on to adjust your expectations to a more reasonable level. One of the best things you can do is downsize. If your kids have moved out, you don’t need a huge home. You can adjust your budget to buy a smaller, more manageable property.
4. Review Your Spending Habits and Find Ways to Cut Back
One of the best things that you can do to help you budget for a new home is to review your spending habits to cut back on areas that are not necessary. This can include smoking, drinking, eating out all the time, and many others. If you know that certain things cost way too much money, now is the time to stop doing them. Try to reduce your expenses by cutting down a little bit per month. Every penny you save by cutting back can go straight to your home budget.
There is nothing fun about being in a state of acute house poverty. But if you play your cards right, this is one ill you can easily skip. The key will be to make sure that you budget in the right way to afford this major purchase. The more care you exercise in doing so, the more bang you can get for your buck.