Step 2 : Figuring out your budget

Step 2 to Buying a Home: Figure Out Your Budget

Before you fall in love with a house, figure out what you’re actually comfortable spending. Not what the bank says you can spend. What you can afford and still sleep at night.

Hi, I’m Josie Sommers, a real estate agent with Coldwell Banker Realty. This is part two of my ten-part series walking first-time buyers through the steps to buying a home. Last week we covered Step 1: checking your credit score. This week is all about your budget.

I’m Learning This Too

I’ll be honest. I haven’t had to pay rent yet, and the only big purchase I’ve made is my car. I have my bills set up on autopay through my credit card so I never miss a payment, and I try to save where I can and only spend on what I need.

I also keep a spreadsheet of my purchases, but mostly for taxes, not for budgeting. I know I should be using it to track what’s coming in versus what’s going out, and to make sure I’m comfortable with that balance. If that sounds like you too, you’re not alone, and this is the perfect time to start.

Your Approval Amount Is Not Your Budget

This is the biggest thing I want first-time buyers to understand. Most people get approved for more than they’re comfortable spending.

A lender looks at your income, your debts, and your credit.
What a lender doesn’t see is your life: what you want to save, what you spend going out with friends, trips you want to take, and what you need to set aside for the unexpected.
You don’t have to spend everything you’re approved for. Look at your own finances and decide what payment you’re truly comfortable with.

Leave Room for a Rainy Day

If I were buying a home right now, I’d make sure I still had money set aside after I moved in, for updates to the house and for the things you can’t predict.

You don’t want to spend right up to your limit. If a rainy day comes, you want to be able to fix it. A furnace that quits, a leaky roof, or a surprise repair is a lot less stressful when you’ve planned for it.

The Costs People Forget About

Your mortgage payment is only part of the picture. Almost every one of these costs surprises first-time buyers with how much it really adds up to:

Property taxes. Often built into your monthly payment, so it’s more than just the loan itself.
Homeowners insurance. Also usually part of your monthly payment.
HOA fees. If you buy a townhome or condo, these monthly dues can go up and down over time.
Utilities. Heating, cooling, water, and electric for a whole house can be more than you’re used to.
Repairs and updates. When something breaks, it’s on you now, not a landlord.
Closing costs. Getting to the closing table costs money too. The lender, the title company, the appraisal, and everyone else involved in the transaction gets paid, and a lot of people don’t factor those costs in until they see them.
Furnishing your new place. Even the basics add up fast.

Your First Move: Talk to a Loan Officer

If a friend asked me how to figure out how much house they can actually afford, my first answer would be: talk to a loan officer. They can help you plan your budget and answer your questions better than anyone.

I recommend David Lozinski with First Equity Mortgage, who I mentioned in my last post. He’s extremely helpful with new home buyers and walks them through the process in a way that’s easy to understand.

That said, you don’t have to use the loan officer I recommend. Whoever you choose is great. What matters is that you have it all in place before you’re ready to make an offer on a home.

Your Step 2 Checklist

Track what’s coming in versus what’s going out each month.
Decide what monthly payment you’re truly comfortable with, not just what you’re approved for.
Plan for property taxes, insurance, HOA fees, utilities, and repairs on top of the loan.
Set money aside for closing costs.
Keep a rainy day fund for after you move in.
Talk to a loan officer early.

Ready to Figure Out Your Budget?

If you’re thinking about buying your first home and you’re not sure where to start with your budget, I’d love to help. There’s no pressure and no question too basic. Reach out anytime, and I can connect you with a trusted lender to get started.

Next week in the series: Step 3 of buying a home.

Call or Text Josie

Josie Sommers, Coldwell Banker Realty
Helping first-time buyers across the Twin Cities.
Call or text: 952-454-8504
josie.sommers@cbrealty.com