One of the first—and most important—steps you can take when buying a new home is determining your budget. Figuring out how much mortgage you can afford can save you valuable time and energy during your new home search.

Following are some simple steps to help you establish your homebuying budget:

• Determine your annual household income (after taxes).
  You can do so by looking at paystubs for all members of your household who will be on the loan. Remember, to factor in any commission, overtime, etc., and keep in mind that this amount represents your total monthly budget for all expenses, including future mortgage payments. Self-employed borrowers should contact a loan officer for assistance in determining qualifying income.

• Make a list of expenses.
  These include recurring expenses, like car payments, health insurance and groceries, and periodic costs, such as dining out, visits to the hair salon and your annual family vacation. Remember to exclude any expenses that will vanish (e.g., renter’s insurance) after your buy a new home. If you don’t currently track your expenses, take a look at your bank and credit card statements to get a rough estimate.

• Separate your musts from your wants.
  Take a hard look at your expense list and decide which expenses are absolutely necessary and which you can do without. You can apply any savings toward your new home budget!

• Factor in expenses related to homeownership.
  We’re talking about your down payment, Homeowners’ Association (HOA) fees and home maintenance costs, among others. Keep in mind that such expenses will vary depending on the type, size and location of your new home.

• Do the math.
  Add up all of your current and new home-related expenses and subtract that number from your after-tax household income. You are now left with your homebuying budget. It’s important to note that buyers often choose not to apply this entire amount toward their monthly mortgage payments, so they will have extra funds should an emergency occur.

• Plug and play.
  Now that you have established your homebuying budget, an online mortgage calculator can help you decide how much house you can afford based on your monthly payment at varying interest rates. 

Keep in mind that mortgage calculators just provide an estimate. The next step is talking to a knowledgeable, licensed professional. Call 866.400.7126 to speak with a HomeAmerican Mortgage Corporation loan officer today!