Your Budget & Finances



The development of a household budget is a desirable activity both before you make a Real Estate purchase as well as consistently during your ownership. By preparing a budget while you are looking at homes, you can better focus on mortgage payment goals and how the new house will affect your total expenses. Maintaining a budget during the time you own the home can help to prevent potential financial disasters as well as point you in a money saving direction so you have more funds available for those things that you need or want.

You will need a little time to develop your budget--it's not a five minute exercise--but should not take longer than a few hours if you gather the necessary information first. Get everyone who will be involved in spending involved in developing the budget.

Some of the items and information you will need to develop your budget are:
  • All current monthly loan payments.
  • All other monthly expenses (such as child care, dues, etc.).
  • Records of variable expenses (for example, utilities, food and car repair) from the last 12 months. This will give you an estimate of your monthly expenditures.
  • Records of annual or semi-annual expenses (such as insurance and taxes).
  • An estimate of what your new mortgage payment will be. You can estimate that using our mortgage calculator.
  • Records of other non-fixed expenses (for example, medical expenditures) for the last year. This will give you an estimate of average expenses of this type.
  • Records or an estimate of personal expenses (entertainment, travel, etc.)
  • Having a current copy of your credit report can be very helpful. Not only will it reveal any inaccuracies in your credit history, it will also give you a clear picture of not only your total debt but your monthly obligations. You can get a free copy of your Credit Report or, see the credit center for additional resources for getting your credit report.

Be realistic in your budget assessment.

Make provisions for possible increases in some items (for example, school tuitions, insurance and taxes). Then, look for ways to get (and maintain) control over your budget.


Most People Spend 10% More Than They Make!

You probably know how much money you made last month, but do you know how much money you spent? Or do you know how much money you have left to spend this month? If you don't you're not alone, most people have no idea. The fact is most of us spend 10% more per month than we make. That comes out to $431 per month based on the average American income. No wonder the average credit card debt is now at $8,500!


Financial Focus
  • Run a Credit Report to make certain that there are no discrepancies or problems in your credit history.
  • Do an analysis of your current financial situation: where the money comes from (your total income) and where the money is presently going (your current spending). Develop a household budget for your current situation. Get into the habit of using it on a consistent basis!
  • Keep your spending patterns in check.
  • Do an analysis of how a house purchase will affect your budget. Be sure to factor in not only mortgage payments (including insurance and taxes) but also funds for items such as repairs and maintenance.
  • Begin to gather items such as: last 3 years Income Tax returns, current copies of pay stubs, records of any past derogatory credit history that has since been paid off, and records of any supplemental income you may have. If you are self employed, you will need all business records and tax returns for the last 3 years. Having these items close at hand will save an enormous amount of time when the Mortgage Company begins to ask for them (and ask for them they will!)
  • If it is possible to do so without adversely affecting your down-payment situation, pay off minor debts. The less debt you have the easier your Mortgage "sailing" will be.
  • Do not incur any new debt. Many mortgage applications have been stopped in their tracks because the applicants had decided a week before the application that a shiny new car with a big finance or lease payment would look just perfect in the driveway of their new home. Since mortgages are based on debt to income ratios (the amount you pay out monthly versus the amount you bring in) a newly acquired debt could be enough to throw the ratios off and make the mortgage unobtainable.

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