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Step 2 of 12 · A few hours

Set a realistic budget

Decide what you can comfortably pay each month, including taxes, insurance and upkeep, not just the most a lender will approve.

Why it matters

Lenders approve the most you can borrow, not what is comfortable. Your budget should leave room for repairs, savings and life.

What to do

  1. Use the 28/36 guideline as a starting point: housing costs under 28% of gross monthly income, all debts under 36%.
  2. Include property tax, homeowners insurance, mortgage insurance and any HOA fees.
  3. Set aside about 1% to 2% of the home’s price each year for maintenance, as a rough rule.
  4. Decide your top price before you start looking, and stick to it.
Mortgage calculatorWork out your numbers for this step

Checklist

Ticks are saved on this device.

Common mistakes

  • Budgeting only for the mortgage payment.
  • Using the lender’s maximum as your target.
  • Forgetting moving costs, furniture and immediate repairs.

General information, not financial or legal advice. Rules vary by state; confirm with your lender, agent or attorney.

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