If you want to buy a home, there are several important factors to consider, including the floor plan, architectural style, curb appeal, and neighborhood. Prior to looking at real estate listings and going to showings, you’ll want to set a budget so you don’t have any trouble making your down payment or mortgage. Here are a handful of helpful ways to decide how much to spend on your new home. 

4 Ways to Decide What to Spend on the New Home 

1. Calculate Your Mortgage

Your mortgage is the amount you owe monthly, including interest, to pay off your home loan. According to financial advisors, 25% of your income is the most you should ever pay. Calculate your maximum home mortgage payment by adding your monthly income and multiplying it by 25%. For instance, if you make $5,000 per month, your monthly mortgage will be $1,250 or less.

2. Set a Budget 

Financial experts recommend spending no more than 36% on the total costs associated with the home. In addition to the mortgage, include the home insurance premium, homeowner’s association fees, and property taxes to your budget. Use this information to adjust the mortgage, interest, and down payment amounts you can feasibly pay. 

3. Consider Miscellaneous Expenses

Miscellaneous expenses associated with new homes often include higher monthly water and power bills, especially if the property is larger, new appliances and furnishings, upgrades, and repairs. Save up for these financial responsibilities by depositing 10% to 20% of your monthly income into savings. 

4. Renovations & Remodeling

If you want to buy a home that requires renovations, factor this into your budget. These projects typically cost about $100 to $200 per square foot. Get a quote on the prospective renovations and subtract that number from the maximum list price on your budget. This will provide you with a comfortable amount to spend on a property before renovations. 

When you’re ready to buy a home, keep the process simple by enlisting the help of Lawrence Realty Inc. These real estate agents assist with purchasing and selling homes and commercial properties throughout Red Wing, MN. Call (651) 388-4745 to ask about real estate listings or start the process of selling your house. Visit the website to browse through the available properties throughout the Minnesota and Wisconsin areas.