Buying a home is a dream for all of us. If you have decided to buy a home, you will now need to rationally think about all aspects of this purchase. Cost of buying a home is huge, so this decision will affect you personally, as well financially. Before you go ahead and start hunting in the market for a great home, you can list out your needs and plan your financial budget.
When you are thinking about your needs, few things you should look at are,
– The number of bedrooms you need.
– Open areas like gardens, pools, etc.
– Garage depending on your present transport and future needs.
– Size of your home.
Once you have thought about these issues and discussed them with your partner and kids, you can now put down simply a short description of what you wish to buy. Next step, in the home buying process, will be budgeting the purchase. If you budget well, you can cut costs by paying a decent amount up front, then park some money for moving in expenses, utility installation in the new home, maintenance costs etc.
You can do a thorough analysis and plan your budget before buying a home, in two steps. In the first step, make your monthly budget, pre-purchase. Every day, you should write down your expenses on a day-to-day basis. Even if you have to take a small notebook, carry it around so that you know your expenses to the last dollar. Add your fixed costs like rents, insurance premiums, taxes etc. Also, list out all your income from all sources. Now, you will know your income and expenses. If you have not begun to put in some savings, it’s high time now. After doing this exercise for three months, you will know the extent of your income, expenses and what amount you can save.
In the second step, you have to make your budget as a homeowner. Just transfer all the details from step one here. You will need to add few more costs now to that budget. You should add toward expense side, following items,
– Mortgage payments including interest, principle, and taxes.
– Maintenance expenses which will be roughly 1% of your cost of the home, annually.
– Utility payments like gas, electricity for the new home.
Now, you will get a real picture of how much you will have to spend and how much you will be able to save. If you see that you are able to save some money, every month, its great. In case you find that you won’t be able to save anything or if you can’t match income and expenses post your purchase, its time to reconsider your decision.
You can now either re-plan your purchase and buy a smaller home or postpone the purchase to a later date. Else, if you see that there are some expenses, which you can cut down. So that you can increase your savings and direct them for payment of mortgages, identify them clearly.
Planning your budget will enable you to buy your dream home, one that you can offer without any hassles of delayed payments.