How to Plan a Budget for Buying a Flat?

A home probably is the biggest purchase you'll make in your lifetime. Of course, with it, you are going to want to be assured you can afford it. What affordability means, however, will vary from purchaser to purchaser.

The mistake that first-time buyers often make is shopping on the amount a lender is willing to advance them, rather than thinking about all of the other expenses. 

Setting a budget for buying a home requires understanding all of the costs involved in homeownership, from homeowner's insurance and property taxes to maintenance costs, not to mention what's needed to close on the house. Here are the costs you'll want to budget for.

1. Know Your Gross Monthly Income

Prior to determining how much house you can afford, you will need to take an honest look at your monthly income and expenditure. Gross income is the term used when referring to the total amount of money you earn before any form of deduction is taken out, this usually includes taxes, retirement contributions or health insurance premiums. Your gross income comprises wages, salaries, bonuses and any other income streams you may have. It is understanding this figure that forms the basis for determining how much house you can afford without overstressing your finances.

2. List Your Monthly Expenses

Now that you have determined your gross monthly income, itemizing and categorizing your monthly expenses would follow as the next step. Expense categorization into fixed and variable helps you identify areas in which you sometimes have to cut back. It also clarifies the part of your income you will have for a down payment and future mortgage payments. Groceries are a variable expense, for instance, and sometimes you can cut back on groceries by having better meal plans. However, you probably won't be too interested in creating a household budget that requires sacrificing too much, especially in such an important area.

You will also forget to include costs that do not recur monthly, like auto repairs or annual memberships. Add these to your home buying budget by averaging them out over 12 months.

It helps to slice up your monthly recurring bills by category and think about which you have to have and which you could afford to live without. This way, you will instantly determine if you have any elbow room in your budget.

3. Budget for Your Down Payment

Another number you will want to know as soon as you start to consider the possibility of making a home purchase is how much you can afford for your down payment. Knowing your range will allow you to estimate what your potential loan principal might be with any house you are considering to buy.

It depends on a number of factors, like the lender and the type of loan you are taking. Sometimes, it goes up to as much as 20% of the actual sale price, but most lenders will not ask for this much. 

That's good to know, however, because there are advantages to higher down payments if you are able to make one: for example, a better interest rate and private mortgage insurance avoidance by putting down the full 20%.

Once you've decided how much income you have to work with and how much you'd like to use toward a down payment on your dream home, you can begin to flesh out what makes sense for you in terms of spending money on housing each month. The 28% rule - one common rule many first-time home buyers adopt when budgeting for a house is to spend no more than 28 percent of your gross income on housing costs. Don't forget the 28% rule, while a good point from which to start, is definitely not a hard-and-fast rule that will work for anyone.

Let's look at a few things you may need to budget into your housing costs.

• Mortgage principal and interest: This will likely be the largest component of your monthly mortgage payment. Principal refers to the amount you owe on your mortgage, while interest is a percentage rate of the loan amount charged by your lender in exchange for providing you with the funds to use in the purchase of your property. An amortized mortgage calculator will be able to give you an estimate of your monthly principal and interest payment, but you will have to input certain key pieces of information like home price, down payment, interest rate, and loan term.
• Homeowners insurance: You will also want to include the cost of homeowners insurance, which will safeguard you in case of an accident or a disaster.
• Private Mortgage Insurance. Based on the kind of mortgage you get and the down payment you make, you may have to pay for private mortgage insurance.
• Property taxes: Each year, you'll have to pay property taxes.
• Homeowners association fees: Depending on where your new home is, you might pay yearly or monthly homeowners association (HOA) fees.

4. Be Prepared for Home Maintenance

Your down payment, monthly mortgage payment and closing costs are just the beginning when it comes to expenses associated with buying a house. You also will want to factor into your monthly budget home maintenance costs.

As a homeowner you will want to factor the following expenses into your budget. Each of the items listed below may not apply to your situation, but it will give you a sense of the different types of maintenance costs you may want to factor into your budget when purchasing a home.

• Common area maintenance
• Pool maintenance
• Pest control
• Appliance maintenance
• Exterior maintenance
• Minor interior repairs

In addition to adding these maintenance costs to your monthly budget you might also consider building an emergency fund for some of these house-related expenses that will come up. 

Own Your Dream Flat from Desai Homes

Home ownership is still the dream of youth, but it can quickly become a nightmare if you miscalculate your purchase and do not make a smart financial plan. In particular, first-time buyers need to be sure that the house they purchase is affordable by considering more than just the monthly mortgage payment.

Without much preliminary calculation, one finds oneself house-rich and cash-poor-or financial pain ahead. Take time to cost your dream home before signing for it.

Desai Homes offers you the chance to own your dream flat, with affordability and financial peace of mind at the forefront of your decision-making.

For more information and enquiries feel free contact us

Email: [email protected] 

Phone Number: +91 484 4177888