How to set a budget while buying your first home

Acquiring home ownership is a challenging task that requires more than just excitement about owning a property. While buying a house is often an emotional purchase for many, it is also a financial decision with commercial and economical aspects. Whether you are buying a house for residency or investment purposes, you need to be well prepared for the hard work that comes with it. Strategic planning is key, especially if you don't have a lot of money to spare. From searching for a property to paying the monthly mortgage, everything must be planned and executed accordingly.

As a first-time homebuyer, you must have a good understanding of the financial aspects of buying a house. This includes the market value of properties, the price of the house, loan options, interest rates, and mortgage payments. It's crucial to plan a budget for your expenses, including the following:

Down Payment

Your down payment plays a crucial role in the home-buying process. You will need to have a decent amount of savings to put towards your down payment and closing costs. The larger your down payment, the more house you can afford, and the more loan the lender will agree to.

External Funds

No matter how much you save or how much loan you get, you will need additional funds to cover your expenses when buying a house. This may include contributions from your parents, siblings, friends, or colleagues. These external funds can help cover any unexpected expenses that may arise.

Mortgage Affordability

The 28% rule states that you should only agree to a loan that has a mortgage payment that makes up 28% of your gross monthly income. This is to ensure that you can afford all your expenses while paying off the mortgage.

Other Expenses

Aside from the mortgage payment, you will also have other expenses such as groceries, utilities, appliances, repairs, and renovations. You need to make sure that you have enough funds and savings to cover these expenses while still making the maximum mortgage payment possible.

A Property Within Your Means

Choosing a property that fits your budget is crucial. You don't want to be house-rich and cash-poor, so be wise in your property choice. Consider the maintenance costs, appliances, and other essential expenses that come with the property, and make sure they fit within your budget.

Bottom line:

The secret to owning a home that meets your expectations is to create a well thought-out budget that takes into account all your expenses, and to stay committed to it as you navigate through the home buying journey. It is important to take the time to plan and carefully consider all the financial aspects involved, such as the down payment, external funding sources, mortgage affordability, ongoing expenses, and property choice, so that you can make informed decisions that align with your financial capacity.

By having a solid budget in place, you can ensure that you can comfortably afford your new home and avoid the financial stress that often comes with home ownership.