For most people, buying a home is probably the biggest financial undertaking they will ever undertake.
Before raising a finger to look for the appropriate financing, first time home buyers really need to take the time to review their finances and see how much home they can really afford.
Budgeting for buying a home is trickier than it looks because if you put the cart before the horse, you may end up with unexpected expenses you did not budget for. The last option is to call a mortgage broker who can offer you creative options for financing your home and provide you with the means to buy more home than your budget allows.
First time home buyers need to have sizable amounts of money put aside for the purchase. Not only do you need to have a 20% down payment but you will need more cash for all the closing costs, inspections and every other little expense associated with the house buying experience.
By building a master list of all income (from work to interest) to all debt (student loans, credit card, car payments) and including all your monthly expenses you can honestly evaluate your budget. Once all that information is on paper you will have a full overview of what money can be moved around to accommodate the expenses associated with buying a home.
Budgeting for your home purchase is based on how much down payment you can afford and how much money you can borrow. By multiplying your annual household income by three, you will get a rough estimate of how much home you can really afford. By using that as your base number and figuring in the other two factors you can gauge if your budget will allows for homeownership.