Tally Your Expenses — All of Them

Be honest about what you spend and what you can afford house-wise. These are the everyday expenses you need to consider when making a budget for your mortgage.
Couple Works Out Budget for Kitchen Renovation

Couple Works Out Budget for Kitchen Renovation

This couple talks with a financial adviser after making the decision to renovate their kitchen. Having a budget to work within will keep the project in line with finances.

Photo by: Jupiterimages

Jupiterimages

By: Tammy Stoner

In all your excitement about the prospect of buying a house, you'll be tempted to twist your financial numbers so you appear more desirable to a potential lender. Instead of admitting the balance on your Visa is $7,000, give a more rosy figure of $5,000. It will be lower in a few months, right?

Remember: Buy too much house and you’ll be flat on your back financially. Be honest about what you spend and what you can afford house-wise. If you need more encouragement to be harshly honest about your expenses and comfort zone of monthly repayment, simply look at the number of home foreclosures nationwide this week.

Before you decide how much you can afford in monthly mortgage payments, calculate your expenses, including (as applicable):

  • Loans - car, student, etc.
  • Insurance - home, car, life, etc.
  • Credit Cards
  • Utilities
  • Property Taxes (based on cost of the home you are interested in, or your own home -- for questions, call your local tax collector since rates vary)
  • Food and Entertainment
  • Kids’ School
  • Retirement Accounts
  • Car Payment
  • Gifts
  • Doctors
  • Vacations
  • Charitable Contributions

And yes, lenders will ask for paperwork backing up all these numbers.

In a competitive market, consider preparing this monthly expenses checklist and collecting all associated paperwork (including bank statement, pay stubs, and tax returns) to get pre-approved for a mortgage amount. Though this isn’t written in stone, it will show sellers that you are serious. It will also help to keep you in check when you fall in love with a home priced too far out of your pre-approved range.

Keep Reading

Next Up

Buying a Home: Don't Forget These Expenses

When deciding how large a down payment you can afford, remember to leave yourself some padding.

All About As-Is Offers

Here are some things to know if you're thinking of making an as-is offer on a home.

Annual Expenses of Homeownership

Which areas of your home need yearly maintenance? Here's the rundown.

Q&A: A NYC Broker on the Benefits of 'Test Driving' Homes

On the fence about a prospective home? Some brokers are letting buyers try out homes before they sign on the dotted line.

Pricing Your Home to Sell

Follow these tips for pricing your home correctly in a competitive market.

Protecting Your Home & Finances in Tough Times

4 steps to take to weather a recession.

Provide Easy Access For Showings

Opening up beyond the open house.

Real Estate Survival Guide: Buyer's Checklist

Refer to this 10-step checklist to get you through the homebuying process.

How to Make an Offer for a House

Making an offer on a house isn't a total roll of the dice. There are some basic steps you and your Realtor can take to arrive at a price range and other terms that make sense.

How to Recession-Proof Your Home Purchase

First-time homebuyers, word to the wise: Look for attributes that add value to your new home to help combat falling prices. Here, basic guidelines to follow.

On TV

Shop This Look

Found a living space you love in HGTV's Photo Library? Get the look in your own home with products from Wayfair.

Follow Us Everywhere

Join the party! Don't miss HGTV in your favorite social media feeds.