How to Budget for a House: A Step-by-Step Guide 

Buying a house is a significant milestone and one of the biggest financial commitments you’ll ever make. Whether you’re a first-time buyer or looking to upgrade, creating a comprehensive budget is crucial. Here’s a simple guide to help you budget for your dream home. 

  1. Assess Your Financial Situation

**Income and Expenses**: Start by calculating your monthly income and expenses. Include all sources of income and all recurring expenses like rent, utilities, groceries, transportation, and entertainment. 

**Savings**: Determine how much you have saved up. This will be crucial for your down payment and closing costs. 

  1. Determine Your Budget

**Affordability Rule**: A common rule of thumb is the 28/36 rule. This means you should spend no more than 28% of your gross monthly income on housing expenses and no more than 36% on total debts (including your mortgage, car loans, and credit card payments). 

**Down Payment**: Aim to save at least 20% of the home’s price for a down payment. This helps you avoid Private Mortgage Insurance (PMI) and reduces your monthly mortgage payments. 

  1. Factor in Additional Costs

**Closing Costs**: These typically range from 2% to 5% of the home’s purchase price. Closing costs include fees for the loan origination, home appraisal, home inspection, title insurance, and more. 

**Moving Costs**: Don’t forget to budget for moving expenses, which can add up quickly. 

**Home Maintenance and Repairs**: Allocate funds for ongoing maintenance and unexpected repairs. A good rule is to set aside 1% of the home’s value annually. 

**Property Taxes and Insurance**: Research the property taxes in the area you’re considering and get insurance quotes to estimate these ongoing costs. 

  1. Get Pre-Approved for a Mortgage

Getting pre-approved gives you a clear picture of how much you can borrow and helps you understand what your monthly payments will look like. It also shows sellers that you’re a serious buyer. 

  1. Stick to Your Budget

Once you have a budget, stick to it. It’s easy to get carried away when house hunting, but staying within your budget will ensure financial stability in the long run. 

  1. Consider Future Expense

Think about future life changes that might impact your budget, such as starting a family, career changes, or major purchases. Make sure your budget has some flexibility to accommodate these changes. 


Budgeting for a house is a detailed process that requires careful planning and discipline. By assessing your financial situation, determining a realistic budget, factoring in all additional costs, getting pre-approved for a mortgage, and planning for the future, you can make this significant financial commitment with confidence. Happy house hunting! 


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