Buying a new home requires a lot of work, planning, and budgeting. Decide on how much you can afford, research home prices, pay down your debts, budget your money, and find the best mortgage rates. This process is complicated and overwhelming, but you can find the right home with the right tools and information. Here are a few steps to take as you start your house hunting journey.
How Much Can You Spend on Monthly Payments?
The first step to take is deciding how much you can afford. A general rule is to not spend more than 30% of your gross monthly income on housing. For example, you want to keep your housing payment at $1,500 or less if your monthly gross income is $5,000. This simple calculation can help guide you through the remaining steps.
Do Your Research
The next step is to research home prices. You may want to buy a million-dollar dream home, but that home may not be in your $1,500 monthly house payment budget unless you have a lot of money for a down payment. Many factors determine the home price you can afford for a $1,500 monthly mortgage payment, including the down payment, length of the mortgage, and the interest rate. A real estate company like The Georgia Club Realty can work with you to find a home within your budget.
Pay Off Your Debts
The next step is sorting out your debts. You should prioritize credit card debt, personal loans, student loans, car loans, medical bills, utility bills, and taxes. Paying off these bills will help you save money for a down payment, improve your credit score, give you better terms on a mortgage, and make your monthly mortgage payments more affordable.
Cut Your Expenses
Saving money for a home means you may have to sacrifice some of the things you enjoy. Some of the expenses you can cut include:
- Freezing your gym membership for a few months and workout at home
- Cut one or more subscription services like Netflix, Hulu, or YouTube Premium
- Pause the contributions to your retirement account for a few months
- Eat out less and make meals at home
Knowing your budget, reducing your debt, and cutting expenses to save money will put you in a position to get an affordable mortgage. Search online for mortgage quotes to determine the cost of buying a home. It is never too late to start planning and saving for the purchase of a new home.