PROCESS

 

You are now ready to start the process of buying a house.  The process begins with looking at your budget.  Your current monthly budget is as follows:

 

Combined Income:

 

Monthly Expenses:

Rent

Renter's Insurance

2 Cars

Car Insurance

Electricity

Phone, Cable, Internet

Cell Phones (2)

Groceries

Credit Cards

Spending

Savings

Total Expenses:

Surplus/Deficit:

 

Make sure you read this:

If you buy a house, your rent would become a mortgage payment and your budgeted housing cost would go up.  This new monthly housing payment would include:

• The principal + interest (from using the =pmt formula).

• The PMI (insurance that you have to pay on the loan when you put down less than 20 percent).  The PMI insurance is usually 0.5%-1% of the entire loan on an annual basis, but for the purposes of this problem, let's assume it is $300 per month (unless you find research with a different figure). 

• Your renter’s insurance would become homeowner’s insurance and be included in your mortgage payment, and it would go up to approximately $125 a month (around $1,500 a year).  (However, if you find a different homeowner's insurance value in your research, use that figure.) 

• Your property taxes (you would research the annual amount for property taxes and divide that amount by 12 to come up with the monthly portion).

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In addition to your housing cost, other expenses will change.  For example:

 

• Your electricity would go up to about $250 a month (sometimes more) and whereas you don't pay for heat in an apartment, you would have to include this category for a house.  Factor in at least $130 for heat.

• While you don't generally pay for water in an apartment, you'd have to add on water to your budget of about $50 per month.

• You wouldn’t have any credit card bills at first because the banks would make you pay them off before they would give you a mortgage, but as home repairs become necessary, this will become another monthly expense that you may end up putting on your credit cards.  (Try to always pay cash!)  Therefore, budget money for credit cards. 

• The amount you save every month would change depending on how much your mortgage payment is, but you should save a minimum of 10 percent per month. 

• You may have to sell a car to afford your mortgage, but if you did that, then you would have to factor in commuting expenses.

• Your grocery amount may change if you choose to eat home more; you'd have to buy more food.

• You may have to look into a different phone/cable/tv package that's more affordable.  Perhaps drop some channels to lower the cost.

• Your spending money may change if you eat out less.