The cost of home ownership is one of the most frequently asked questions by first time home buyers. The average real estate agent will tell you to contact their preferred mortgage lender, but Cathy Bureau will go beyond that. This question has a direct and indirect facet so I will touch on both.
1. How much will the lender let me borrow?
A mortgage lender will pre-qualify you based on your income, debt-to equity ratio, credit score, etc. They will arrive at an answer of a monthly payment near 28% of your gross income subject to debt and credit score. They will provide and estimated GFE (Good Faith Estimate) - which breaks down the cost of acquiring the home such as appraisals, discount points, mortgage insurance, amount needed for down payment (Texas Housing Assistance may be applicable) etc. That is a very important part of the process. But, it doesn't help you with the second facet.
2. How will the home expenses effect my budget?
You need to know what the bank will lend to you, but you also need to understand the associated costs of home ownership and its effect on your personal budget. There is a short-term and long-term aspect to this question.
The short-term has to do with your current expenditures and income based on the next 1-5 years. To assist you I have provided 2 worksheets that I can email to you if you register on Cathy Bureau's website. If you are within 12 months of purchasing a home Cathy will be happy to help you formulate a budget and get pre-approved for a home.
The long-term aspect has to do with the life changes that may occur beyond 5 years: retirement, children, re-location, etc. Because that is more complicated it would be wise to have an extended conversation with Cathy Bureau to better consult you in these matters.
Regardless - don't just think about the mortgage amount, the costs of that, and insurance. Think about the short-term and long-term facet of how these new expenses INCLUDING REPAIRS and MAINTENANCE will factor into your daily living and personal budget.
A simple Personal Budget will assist you analyze how you spend money and how the new expenses will impact your current lifestyle.
If you are the analytical type and/or really like to see things graphically, you might prefer this one: