If you’re like most homebuyers, you’ll need a mortgage loan to finance the purchase of your home. This means you’ll have to pay a monthly mortgage payment, usually for 15 or 30 years depending on the term of your loan.

You don’t want to struggle to make this payment each month. Doing so makes you house poor, meaning that you are spending more on your home than you can comfortably afford. Being house poor can drain the joy out of owning a home.

How to avoid this? Create a budget.

The power of a budget

It’s true: Few people enjoy creating a household budget. But if you have a budget in place before you start looking for a home, you’ll know exactly how much of a mortgage payment you can afford each month. And this will reduce future financial stress.

A budget simply tracks your monthly spending and income. When creating your budget, list the money you receive each month, including salary, expected commissions and/or bonuses, payments from investments, Social Security payments, alimony, rewards from legal disputes, and other income sources.

Next, track your monthly spending. This can be a bit more complicated. Include fixed expenses you incur each month, such as your auto loan payment, student loan payment, minimum required credit card payment and insurance costs.

Next, account for the expenses you incur each month that vary, e.g., utilities, cellphone, cable TV and streaming services, internet, transportation. Calculate what you spend on average on these costs each month. Also include the estimated amount you spend on groceries, eating out, doctors’ visits and entertainment.

Compare your monthly income with your monthly debts. This will tell you how much of a mortgage payment you can afford to make each month.

Don’t overspend on a mortgage

Be careful to not overspend on a mortgage. You shouldn’t let your mortgage payment consume all your extra income. That will leave too little room to cover financial emergencies. You should always have enough money to create an emergency fund — a pool of money that you use only to cover unexpected expenses. Financial experts recommend that you keep enough money in this fund to cover three to six or more months of your average monthly expenses.

Keep your budget in mind when searching for a home

When looking for a home, remember your budget and how much of a mortgage payment you can afford. This will help you avoid overspending.

In fact, you should get preapproved for a mortgage before you even start hunting for a house. In this process, a lender will look at your credit score, income and expenses to determine how much of a mortgage you can afford. Once your lender preapproves you (which is a free process) your lender will give you a preapproval letter stating how much of a mortgage, and how expensive of a house, you can afford.

Armed with this letter, you can avoid viewing or making offers on homes that could bust your budget and bring you financial stress.

Information provided by John Szolomayer, RE/MAX Executive Realty. For more information, John Szolomayer can be reached at 508-259-4788 or JohnSzolomayer.com

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