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


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.

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