Ignite FB Tracking PixelFirst-Time Homebuyers: Best Way to Budget for Your New Home - Diana Lucivero, CRS

First-Time Homebuyers: Best Way to Budget for Your New Home

by Diana Lucivero, CRS 07/19/2021

Photo by Olya Adamovich via Pixabay

You’ve decided to start the process of buying a home. Congratulations! Now it’s time to figure out how much money you have, and what you can afford. The goal is to avoid purchasing more home than you can afford, but those variables change. In September 2019, the average price of a new home was almost $363,000. As an average, that may sound a bit steep, especially if this is your very first home.

A home may be one of the largest purchases you make. That’s why it’s important to go in with a clear head and everything aligned. Here are a few tips on learning how to budget when you’re preparing to purchase a new home:

  • Start with the 25% rule

Your mortgage should not be more than 25% of your gross income each month.

  • Consider every source of income you have. That means if you have 2 paychecks each month, each one should be included. If you have side work, that should also be included. That will encompass your total monthly income.
  • Write down your monthly expenses and make sure you leave nothing out. That means your donations to charity, student loans, transportation/gas, movie night, coffee and everything else you spend on a monthly basis.
  • Once you have these figures, subtract the expenses from the income. That will help you determine the max you will be able to pay for your mortgage. It’s also important to have a place to set aside some money for repairs. As a homeowner, things happen.

Any existing debt you have should be eliminated if you can afford it. The lower your debt to income ratio when you start the process, the better off you will be. Additionally, you should save as much as you can for a potential down payment. Depending on the loan, that will be 10 to 20%.

The figures you come up with will give you a good idea of where you stand and is a good starting point for your initial meeting with a mortgage broker. It’s also a good idea to review the types of loans that you may qualify for and look at the requirements. That will give you a general idea of the amount of money you will need to come up with for a viable down payment.

Although things may seem complicated, once you get started, everything should fall into place. Your real estate agent or mortgage broker will be able to provide more insight once you get started. Take your time and don't rush the process. It will be worth your while in the end.

About the Author
Author

Diana Lucivero, CRS

  

A top-performing agent, Diana's integrity, work ethic, and enthusiasm which are grounded in a corporate sales discipline and hospitality industry background, quickly established her a reputation in the Cape Cod residential real estate market for routinely going above and beyond to exceed her clients’ expectations. Her keen analytical skills have been invaluable in guiding and advising her clients regarding the pricing and marketing of their properties.

She joined Compass after more than three decades in positions with Starwood Hotels and Resorts, Boston College Law School, and major realty firms in Cape Cod and West Palm Beach.

Professionally, Diana is a member of the National Association of Realtors and has earned its Certified Residential Specialist (CRS) designation. She is also a Certified Luxury Estate Advisor (LEA). Diana is a member of the National Association of Realtors®, Massachusetts Association of Realtors®, Cape and Islands Association of Realtors®. 

Diana's passion for the military is evident with her philanthropic efforts supporting The Fisher House, Wreaths Across America and Tunnels to Towers and she takes great joy in volunteering in support of military families throughout the area.

Diana lives in Falmouth with her husband Jim. They have two children, a son who is a West Point Graduate, Officer and Green Beret in the Army and a daughter, a Boston University graduate who is a sports reporter for NBC.

In her free time Diana enjoys tennis, pickle ball, golf, snowboarding, cooking and spending time with family and friends.