- Your total monthly home payment includes mortgage principal, interest, property taxes, homeowner’s insurance, and any mortgage insurance.
- Estimate expenses for electricity, gas, cable, water, and other required monthly costs of homeownership such as condo or Homeowner’s Association (HOA) dues. Also, estimate expenses for home maintenance and improvements. Make sure you will have enough money to pay for these costs in addition to your total monthly home payment.
- Think about what your budget will be once you have bought your home, and decide how much you want to be saving each month for emergencies and other goals.
If you are considering cutting back on some of your discretionary spending in order to be able to comfortably afford the kind of home you want, take a second look at your budget and make realistic adjustments. Make sure your adjusted budget adequately accounts for all the new costs of homeownership.
What to know
This is just the first step in deciding how much you can afford
As you move forward in your home search and mortgage process, you’ll gather more information and can refine your assumptions. Come back to this step and revisit your budget and your calculations as you gather more information.
Many homeowners pay their property taxes and homeowners insurance bundled into their mortgage payment
This arrangement is known as an escrow account. If you do not have an escrow account, you will still have to pay these costs. An escrow account lets you put aside the money monthly so that you won’t have a big expense during the year.
Some types of homes may have additional required monthly costs
If you’re interested in buying a condo, co-op, or a home in a planned subdivision or other organized community with shared services, you usually have to pay condo fees or Homeowners Association (HOA) dues. These fees vary widely depending on the amenities provided by the community. Consider these fees carefully when comparing potential homes. You may not be able to afford a home that is generally in your price range if the condo or HOA fees are higher than you were expecting. Condo or HOA fees are usually paid separately from your monthly mortgage payment.