Budgeting isn’t easy, but the fact is, if home buyers don’t set a budget for what they can afford for a house, things can go terribly wrong. The recent subprime mortgage crisis is a perfect example. Banks may say home-buying hopefuls can afford an amount they actually cannot afford. Budgeting is one way to ensure you don’t get trapped by knowing what you can and cannot afford to remain financially comfortable.
Create a budget that includes your major expenses. Examples of major expenses could be student loan payments, transportation costs (gas, car payments, etc.), credit card bills, cable bills and telephone bills. Also be sure to include expenses that come only once a year, like holiday bills or taxes. Add all this together and subtract it from what your earnings — the result is what you can afford on a house.Home buyers who skip this step could end up either badly wanting something they can’t afford and/or putting themselves at risk financially.
Mistake 2: Skipping Mortgage Qualifications.
