Buying a home is going to be one of the largest financial transactions you make, and preparing your finances beforehand will make the home buying process far less stressful. The following recommendations and expert insight will assist you to get your budget in order prior to making the important transaction. 
5 Budgeting Recommendations For Buying a Home
1. Organize Your Financial situation Chances are you’ll know how much you have in your checking and savings accounts, but are you aware of how much you spend on household expenses on a monthly basis? Or just how much high-interest and credit card debt you possess?
It is essential to get a clear concept of where your dollars go in order to determine what you can afford and what your home buying timeline is. Personal finance experts at OnStride suggest breaking down your finances into the following categories:
Level 1: Basic Budgeting: Basic financial needs, like rent, groceries and gas.
Level 2: Emergency Funds: In the event of an accident or any other costly event.
Level 3: Passive Preparation: 401K or IRA plans that you manage yourself.
Level 4: High-Interest Debts: Anything with an interest rate of 10% or higher.
Level 5: Long-Term Savings: Money you’ve already set aside for your home, or have been saving otherwise. (Note this is different from your emergency fund – with no a savings beyond your emergency fund, separate them now.)
Level 6: The Leftovers: Is there still money floating around in your account?
Figure out how you’ll best make use of this to put together for home buying – play the market, place it in a high-yield savings account, etc. With your finances categorized and prepared, you can begin to set goals for how much you must save, and for the length of time, along with the places you have to cut back.
2. Do the Math Before you decide to set any home-buying goals, do the math to determine what you can afford. This is going to also dictate how much you have to save. Dave Ramsey shares five steps to figure this out: Add up your income List household expenses (When you organized your finances above, then this step is already done!) Calculate home ownership costs (Check out this list from US News) Give your budget room to increase: “Life is going to happen in the years you occupy your home. Before you get married to a mortgage, look ahead and consider events that might increase your living expenses down the road.” Make adjustments: Cut back here, save more here, etc. (See the next section)
3. Set Goals While the overarching goal is to purchase a home, setting smaller goals will assist you to keep on track and feel successful as you make your way there. Whenever you set goals, keep in mind that it’s not necessary to be solely focused on saving. You may want to set goals for reducing spending also. Here’s a few to think about: Save $1,000 in 90 day Switch to a cheaper gym Cancel my cable bill by the summer Go out to eat one time weekly Buy one less coffee weekly this month
4. Write Your Budget The math has been done, goals have already been set and now you’re ready to write your monthly budget, which ought to take into consideration: Total to be saved on a monthly basis Life expenses Any unusual expenses for the month Ultimately, you’ll have a total spend for life expenses along with a total amount to be saved by month’s end. You may use a spreadsheet and do this by hand, or download one of these budgeting apps.
5. Update Weekly; Reassess Regularly The last step is holding yourself accountable to your goals and regular updates of the budget. If you make a purchase that wasn’t planned for, add it to your budget and readjust the amount you can actually save that month. Keep in mind that a budget is fluid, and you will find many “life things” that will arise and throw it off. That’s okay, as long as you remain focused on the goals you’ve set for yourself. If you go over budget 1 week, reel it in the following to help you stay on track for the month.
As a homeowner, you will discover dozens of expensive issues that could arise. Get into a practice of budgeting now so you’re ready for these financial challenges whenever they inevitably turn up.
Searching for a new home? Nick, Cindy & Nicholas Davis with RE/MAX Premier Group are here to assist you in the Tampa Bay & Surrounding Areas.