How to Budget for a House
Budget for a House – When you decide to buy a home, one of the first tasks you need to complete is to determine the amount you can afford to pay each month. Knowing how to budget for a house is crucial in calculating the price range for the home itself.
Some house listings may indicate some of its current expenses, such as property tax and electricity. You can use these figures in establishing a baseline monthly amount, but it is not complete. To budget accurately for a home, you need to include as many recurring expenses as possible to ensure that your home affordability budget is comprehensive, and therefore realistic.
There are several reasons for calculating affordability. First, you don’t want to spend time looking and dreaming of homes that you cannot afford to buy. You would be better off looking at properties in the lower end of your price range and working up. That way, you can understand what you get with a home priced at $200,000 versus what you get at $155,000.
Next, it isn’t just about how much you are allowed to borrow. Knowing how to budget for a house indicates in black and white what you can afford comfortably in your overall financial landscape. Not only do you need to factor in the monthly mortgage payment itself, but you may have mortgage insurance, home insurance, property taxes, water bill, car payments, medical fees, grocery bills, student loans – and all of these expenses will affect how much money you will have left.
So what should you include in a home budget? Some of the basic costs that will help you how to budget for a house are below.
Home Warranty
A home warranty is a type of insurance that will help you recoup the replacement or repair costs of items covered under the plan. This is a set cost, which makes it easy to include in a home budget. Make sure you read your warranty carefully so you know exactly what is covered, what is not, how much your deductible is, and how much money you may expect to recoup in case you need to make a claim.
Out with the Old
Whether you are buying an older home or a brand new one, at some point you will need to replace older, broken, or inefficient components, such as the driveway, roof, windows, carpets, paint, just to name a few.
Budgeting for these repairs from the get-go is a great way to know that you have the money available when you need it without having to put the expense on credit. Get estimates so that you know how much to allot each month, and remember to allot more money for those items that need to be replaced sooner.
Appliances
Cooking, heating, baking, cleaning – we all use appliances every day for different, yet necessary tasks. But nothing lasts forever, and some appliances seem to break faster than expected, especially if you have older or inefficient appliances. For example, gas and electric dryers have an average life expectancy of 13 years. Washing machines tend to last 10 years and freezers 11 years. Determine the age of your appliances and calculate a monthly cost into your home budget so that you are not caught off guard when something needs to be fixed.
Recurring Expenses
Everyone has certain expenses that they know they have to pay – groceries, clothing allowance, homeowner’s association dues, car insurance, utilities, among others – and you need to include these in your budget too. Take a look at your accounts and bills to get a decent estimate about how much these items cost you each month. Don’t forget to include “fun” expenses as well, such as vacations, eating out, and gifts, as well as debt repayment and retirement savings.
Expect the Unexpected
As odd as it sounds, your home budget also has to account for unexpected expenses too. This can include traffic tickets, workplace donations, or repairing a lawnmower. Therefore, it helps to save a small amount in a rainy day fund to cover costs that you have not accounted for in your other budget categories.
Know Your Numbers
Crunching numbers is not the most exciting way to spend an evening or weekend, but financially, how to budget for a house is a smart activity to complete. Knowing what you can afford – truly afford – can save you headaches once the reality of living in a new home has set in. Do it right and live happily ever after.
Source: Shamrockfinancial.com
How to Budget for a House
