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

Annual Expenses of Homeownership

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

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.

Real Estate Survival Guide: Buyer's Checklist

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

Calculating Your Property Tax Bill

The tax amount you see on a listing might have nothing to do with how much your property tax bill will be after you buy the home. Here's how to crunch the numbers.

When They Say No: Finding Mortgage Money

Lending guidelines have tightened, but getting a loan is still possible.

The Red Flags of Mortgage Fraud

With mortgage brokers like these, you don’t need enemies. Know how to protect yourself from a scam.

Cobbling Together the Cash to Go Conventional

Five ways to afford a sizeable down payment.

Managing Buyer's Remorse

I've heard it said that the last day either Buyer or Seller is truly happy with the price and terms of the transaction is the day the offer is accepted. I would say that's the last moment either side is happy. Here's how to prevent "Buyer's remorse".

Understanding Property Taxes and Assessments

Homeowners have to pay property taxes. Before you buy, know how your local property taxes and special assessments will impact your cost of ownership.

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.