As you prepare to buy your new home, find out how to budget for a house in the Wichita real estate market whether you’re a first-time buyer or a seasoned pro.
Are you preparing to purchase a new home in Wichita, KS?
Whether it’s going to be the first or tenth home you own, it’s important for you to come up with a budget for a house before you start shopping around. Knowing how to budget for a house is a very important part of the home-buying process.
Unfortunately, far too many people fail to come up with a budget for a home and end up paying the price for it. They buy something that’s too expensive for them and are then surprised when they struggle to pay their mortgage later.
Avoid falling into that kind of scenario by crunching the numbers and coming up with a firm budget before you even think about making an offer on a home. Here’s how you can do it.
Figure Out How Much Income You’re Generating Every Month
The first thing you want to do when trying to create a budget for buying a house is find out how much income you’re bringing in each month.
This should be easy to do. Take a look at your recent bank statements and add up all the income you’ve had coming in.
The only time you might have a problem doing this is if you work as an independent contractor and get paid sporadically for your work. If you fall into this category, look back at your income over the last six months to a year and figure out how much you’ve made on average every month.
By doing this, you can get a good idea of how much money you’re generating on a month to month basis.
Write Down All Your Regular Monthly Expenses
After you’ve gone through your bank statements and written down how much income you’re generating, it’s time to assess your monthly expenses. If you don’t keep good track of them, go back through your statements again and write down all your regular expenses.
These expenses should include things like:
- Utilities
- Food
- Clothing
- Transportation
- Medical
- And more
You should also write down your irregular expenses (car repairs, etc.) and average them out over the last six months to a year. This will give you a better idea of how much you’re spending on regular and irregular expenses every month.
See How Much You Have Left Over to Devote to a Mortgage
Once you have figured out your monthly income expenses, subtract your expenses from your income.
How much money do you have left over at the end of every month?
That is approximately how much money you can afford to spend on a new home in Wichita, KS.
Keep in mind that you don’t have to spend everything that you have left over on a home. Additionally, remember that most experts suggest you shouldn’t spend more than 25 percent on your monthly income on housing.
Think About How Much of a Down Payment You Can Afford
In order to buy a home in Wichita, KS, you’ll most likely need to put down a down payment. Depending on your financial situation and the type of loan you get for a home, you might have to put down anywhere from 1 to 20 percent of the total cost of a home.
You should factor your down payment into your budget. If you opt to buy a more expensive home, your down payment will be higher. It could cut into your savings and put you in a tough spot later if you’re not careful.
Keep the Hidden Costs of Owning a Home in Mind
Remember how we said earlier that your monthly income minus your expenses determine your budget for buying a house?
That’s technically true, but there’s a catch. There are other expenses you’ll need to consider when buying a home.
When you own a home, you need to pay taxes on it. You’ll also need to take out a home insurance policy for your house. You might need to buy private mortgage insurance if you don’t put a 20 percent down payment down on a home.
Then there’s all the maintenance you’ll have to do on your home. When you own a home, you’re responsible for making repairs to the plumbing, the HVAC system, and everything else.
Therefore, it’s a good idea to set aside some money every month to cover any repairs or maintenance jobs that might pop up.
These hidden costs can add up and cut into the money you were planning to spend on a home. Make sure you factor them into the equation and resist the urge to spend all the money you have available for housing on the mortgage alone.
Start Shopping Around for Homes in Your Price Range
At this point, you should have a pretty good idea of how much you can afford to spend on a house.
As long as you’ve considered your income, expenses, and the hidden costs of owning a home, it shouldn’t be too hard to come up with a realistic budget for a house.
You can start shopping around for homes once you have it all figured out. Steer clear of walking through homes that are out of your price range. The last thing you want to do is fall in love with something you can’t afford.
Learn How to Budget for a House and Set Yourself Up for Long-Term Success
Knowing how to budget for a house is one thing. Actually sticking to that budget is another!
If you decide to spend beyond what your budget allows on a home, it’s likely going to be bad news for you. You could end up in the hole every month and have to make major sacrifices to survive.
Being “house poor” is no way to go through life. Avoid overextending your money at all costs.
Read our blog for more information on budgeting for a home and finding the right home in Wichita, KS.
