If debt is taking up any percentage of your income right now, hold off on purchasing a home and work at becoming debt-free first. It’s not the American Dream if you live under a leaky roof you can’t afford to fix! That’s because Dave recommends paying off all non-mortgage debts before taking the leap into home ownership. You may have noticed one category wasn’t included in our sample budget: debt. Related: Want to learn more about how to save up a down payment on a house fast? Our 5-Day Home Buyer Savings Planwill help you discover simple tricks to save a five-figure down payment by this time next year! Isn’t Something Missing? Feel free to make it your own! Just make sure your mortgage payment doesn’t eat up more than a quarter of your monthly income so you have enough money to cover the other categories without straining your budget. If some of these categories don’t fit, repurpose your money elsewhere. We’ve assumed some things in this sample. Why is zero the magic number? Because that means you’ve given every dollar a purpose.Įverybody’s budget is going to be different. The magic happens when your income minus outgo equals zero. Don’t forget to save a little extra each month to cover regular maintenance as well as well as future home improvements and furniture replacement. Dave recommends keeping your mortgage payment to no more than 25% of your monthly take-home pay on a 15-year fixed-rate mortgage. That leaves $1,500 to cover housing costs. See how much house you can afford with our free mortgage calculator! Here are a few common categories to consider. Start by adding up every source of income that comes into your checking account each month. If you need help figuring out how much house you can afford, try our free mortgage calculator.

If you’re not ready to make an all-cash offer, however, you need to factor a mortgage payment into your monthly budget. If you follow Dave’s favorite home-buying plan-paying cash for your home-you’re only limited by how much you can save. Let’s break it down into a real-world example to see how it works. Budgeting may get a bad rap, but it’s really quite simple to do. That’s where the dreaded B-word comes in. But how do you know how much home you can afford? Owning a home is a huge blessing when you have the money to make it work.

New home budget spreadsheet