Tips for Finding Your Home-Buying Budget | Jason Cohen Pittsburgh

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Tips for Finding Your Homebuying Budget

by Jason Cohen Pittsburgh | Sep 1, 2020 | Jason Cohen Pittsburgh, real estate

Buying a home is among the most important and expensive decisions that people make in their lives. For this reason, it can be the hardest and most stressful decision to make. The current world

climate is also causing a ripple e ect that can make it even more stressful. People are understandably wary to commit to something like a rst home. However, there are various steps that potential rst-time owners can take to establish a home buying budget with fewer commitments. Adherence to 25 Percent Rule While formulating a home-buying budget it is crucial that buyers stick to what they can a ord. This can be attained especially by adherence to the 25% rule, which states that home buyers should never have their monthly mortgage payment above 25% of their gross monthly income. Currently, the Federal Housing Authority has raised that number to allow for spending 31% of gross monthly income on a mortgage, however, buyers should consider other expenditures and debts very seriously before considering this option. 25% is a good estimate to consider as a monthly income when seeking a mortgage.

Consider Additional Expenses Homebuyers need to also consider other expenses beyond a mortgage payment. Prior to even building a mortgage budget, it is crucial to get approval from the bank for a loan. They will set the terms with you. The buyer should always get the loan approval rst, so they understand the actual cost to set aside each month. Once this is established, they need to calculate all of their other monthly xed and exible expenses. This includes everything such as home repairs, utility bills, health insurance, water bills, and electricity. All of these costs play a signi cant role in attaining a suitable budget for buying a home. You need to calculate everything in order to get

a realistic picture of how much you have to work with, as well as any disposable income to save for an emergency fund.

In addition, most lenders usually expect the buyer to nance a down payment of 20% of a home’s value. The amount varies with the home size, the buyer’s credit score, and the potential for the property to rise in value. It also directly a ects the number of monthly payments. After all of this is calculated, there are also closing costs, which are paid by the buyer.

Homeownership is still everyone’s dream, but it can become stressful if the expenses are miscalculated. However, they can ensure the process of home buying is seamless by considering expenses that go beyond the mortgage payment.

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