How To Budget for a New Home

Be realistic about what you can afford when figuring out monthly mortgage payments.
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Shopping for new digs is an exhilarating time, especially when you find the perfect little jewel in the perfect little neighborhood. The way you budget for a new home depends largely on how you live now. For example, couples moving from a starter home to a second-stage home differ significantly from first-time home buyers who are transitioning from paying rent to paying a mortgage. The most prudent budget course to follow for renters about to advance to home ownership is to live within the confines of a large monthly payment while still renting.

Step 1

Determine an exact date when you would like to move into your new home. Make sure you are specific. For instance, rather than saying, “we’d like to have a new home in the next six months,” say “we will move in to our new home on October 1”.

Step 2

Calculate a mortgage payment that you can both afford. Use the mortgage calculator tool in the "Resources" section to settle on an amount that works within your current budget.

Step 3

Split this payment between the two of you.

Step 4

Open a high interest savings account or money market account. Make sure the funds are guaranteed by the Federal Deposit Insurance Corporation.

Step 5

Deposit the two halves of the mortgage payment into this account at the first of every month. For example, if the mortgage payment you agreed upon was $1150, each of you would deposit $575 into your savings account each month. Cut back on flexible expenses such as entertainment, eating out, clothes, shoes, travel and electronics to make room for this savings. This is easier to do than you might think. Dropping your $5 morning latté alone will net you $100 per month.

Step 6

Continue this practice for the duration of time up until your projected move-in date.

Step 7

Put this money toward the down payment on your new home.

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