Buyer Tips: Have you figured out your budget?

When you’re buying a home for the first time, setting a budget is key and crucial as this will have a long term affect on you.

Look at your monthly spending to see what you can afford for principal, interest, taxes and insurance,” says Lindsay. Factor in maintenance and emergency savings for repair too. One lesson from the housing crash: Just because the bank approves you for a certain amount it doesn’t mean you can afford it.

In addition to household expenses, consider other financial obligations that lenders won’t see on your credit report. Your cell phone, utility, daycare/tuition, grocery and car insurance bills are other fixed monthly expenses that factor into how much house you can afford.

Don’t max out your monthly income on mortgage payments and wind up house poor, or you might regret it later. Don’t forget that homeownership comes with unforeseen expenses.

As a rule of thumb, clients should prepare to spend 1 to 3 percent of the value of their homes each year on house expenses.

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