One of the first steps on your journey to buying a home is determining what fits comfortably within your budget. Setting a budget for buying a home involves careful planning and understanding your financial situation. Here’s a step-by-step guide to help you get started:

1. Assess Your Financial Situation

• Determine Your Income: Calculate your monthly income from all sources.
• Evaluate Debt: List monthly debt payments (credit cards, student loans, car payments, etc.).
• Track Expenses: Review your spending habits to understand how much money you can allocate to housing.

2. Determine Your Down Payment

• While a 20% down payment is what you usually hear is needed, many loan options are available that allow you to put down as little as 3-5%, making homeownership more accessible. In face there are thousands of down payment assistance programs out there that can help you even further get into a future home. 

3. Calculate How Much You Can Afford

• A common rule of thumb is to spend no more than 30-35% of your gross monthly income on housing costs (mortgage, property taxes, insurance, etc.).
• Lenders also consider your debt-to-income (DTI) ratio, which should ideally be under 36% (total monthly debt, including the mortgage, divided by gross monthly income).

4. Estimate Additional Costs

• Closing Costs: Typically 2-5% of the home’s price.
• Property Taxes and Homeowner’s Insurance: Based on the home’s location and value.
• HOA Fees: If the home is part of a community with a homeowners' association.

5. Get Pre-Approved for a Mortgage

• Contact a lender to get pre-approved. This will help you understand how much you can borrow and what your monthly payments would look like.

6. Set a Maximum Budget

• Based on your calculations, determine the maximum price you’re willing to pay for a home. Be conservative to avoid overextending your finances.
• Stick to this budget when house hunting, even if you’re tempted by higher-priced properties.

7. Plan for Flexibility

• Allow room in your budget for unexpected costs, such as moving expenses or unexpected repairs.

If owning a home is part of your 2025 goals, I’m here to guide you every step of the way. From finding the right lenders to exploring down payment assistance programs, I’m ready to help you get started!