As a homeowner, here are some of the expenses you will experience:

1. Homeowner’s Insurance

2. Taxes

3. Emergency Repairs and Home Improvements

4. Landscaping

5. Utilities

When determining your budget you need to keep these things in mind and plan accordingly.

Lenders are currently only willing to lend an amount where the monthly payment, including taxes and insurance, equals up to 38% of your gross monthly income. FHA loans stretch these numbers somewhat and you may be able to find a loan program willing to lend up to 42%  of your gross monthly income. We suggest that you use bankrate.com where you will find multiple calculators that can help you determine what you can  afford.

The biggest mistake people made in the past is that they purchased houses based on the current payment and then found that once the loan began to amortize or the interest rate increased, they could no longer make the payments. We suggest that you get a fixed rate loan and have a cushion each month that will allow you to save for the inevitable extras that come with home ownership.

The ability to make payments and comfort level associated with this type of decision is wholly personal. Many people find that they need to have extra money every month for a new car payment, vacations, and other expenses that, although not required, are enjoyable. Lenders do not look at these additional expenses and do not take into account anything but income and credit score when determining your loan worthiness. This puts the entire burden on you!

Make a budget. There are many sites where you can create a budget for yourself, such as Mint.com and Yodlee.com. 

When you are looking at your budget anticipate what you believe the expenses in the new home will be. After the budget is done and you deduct your mortgage payment, make sure there is enough left to save a little and cover those emergencies that inevitably pop up from time to time.  Seek professional help from a financial planner or accountant who will be more than happy to help you work on your budget.

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