Young consumers dream of the day they will own their homes. Their hopes and dreams are a mansion, but in all actuality, single-story home is what they will end up with. There is nothing wrong with a small home. It will give you the base to prepare for a larger home in the future. However, you must get enough funding to financially support your first home. Below, you will discover a list of budgeting tips to jumpstart your saving effort.
Do Not Go Overboard
When consumers plan for a future mortgage, they oftentimes become blindsided by homeownership. They forget about their other debts, such as a car payment, insurance premiums, utility bills, property taxes, and other expenses. There is no doubt, owning a home is every young consumer’s dream. Going overboard will leave you in a financial predicament that could risk losing your home.
Keep all the important expenses in mind when planning a budget for your first mortgage. You can learn more about home budgeting from the experts at Budgetable. Every household always needs emergency cash on hand because the inevitable can happen at any time.
How Much To Spend
It is pertinent to find out how much to spend on your mortgage. Although it will depend on numerous circumstances, lenders agree that consumers shouldn’t spend more than 28% of their gross monthly income on a mortgage. As for total debt, consumers shouldn’t spend more than 36% on total debt. The rule is often referred to as the 28/36 budgeting rule. When establishing a mortgage for your home purchase, it is a good idea to use this rule to your benefit. Readers will find that the Federal Housing Administration is more generous since it allows consumers to spend up to 31% of their income on their mortgage payments.
Do not buy a bigger home than you can really afford. You are going to need money for a wardrobe, medical bills, and other household expenses.
Don’t Forget The Down Payment
Besides the monthly mortgage payment, consumers cannot ignore their down payment. It is equally important. In general, it is recommended that consumers have a 20% down payment for the home. If they’re purchasing a $300,000 home, they should have a down payment of $60,000. Doing so guarantees that you can make the down payment and handle the mortgage payment as well.
The best thing to remember is that consumers can normally afford 2.5 times their annual income. Therefore, someone making $60,000 would be able to afford a mortgage of $120,000 or $150,000.
Besides dealing with the mortgage payment and down payment, consumers will also have to worry about home repairs. There is a good chance that you’ll have to complete a few repairs here and there. As a result, you should be ready to tackle these problems and get them fixed. To achieve this goal, you’ll have to pay a fee. Even if you handle the repair on your own, you’ll still have to pay for the materials. Therefore, you should add these expenses to your budget. Make sure that you can afford them.