How Much Home Can I Afford? - Defining Your Personal Budget

Real Estate Broker/Owner with Criado Realty 0548772

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.


Personal Budget Spreadsheet


If you are the analytical type and/or really like to see things graphically, you might prefer this one:


Household Monthly Budget


Posted by
Cathy Criado President & Founder
Published Author
Your Real Estate Consultant!
999 E Basse Rd. #180-425, ​San Antonio, TX  78209​
​Direct:  (210) 560-1891
Criado Realty Logo

Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Brenda Mullen 11/21/2011 09:13 AM
  2. Merv Edinger & Associates 11/22/2011 04:17 AM
  3. Winston Heverly 11/22/2011 04:19 PM
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Gary L. Waters, Broker Owner, Waters Realty of Brevard, LLC
Waters Realty of Brevard, LLC - Rockledge, FL
... a small office, delivering big service!

Very true.  People often forget about all the extra costs of home ownership.  Starting with a budget - and sticking with it - seems only logical.

Nov 21, 2011 09:20 AM #18
Kwee Huset
Kwee Huset Realty - Venice, FL
Venice Florida Homes For Sale

Cathy, great information for the first time home buyers, especially the repair and maintenance budget most of the time are unprepare for it.

Nov 22, 2011 01:22 AM #19
Sylvie Stuart
Realty One Group Mountain Desert 928-600-2765 - Flagstaff, AZ
Home Buying, Home Selling and Investment - Flagsta

Great Graphs! Very thorough explanation that will help a lot of buyers! Thanks!

Nov 22, 2011 01:26 AM #20
David Krichmar - Legend Lending - Sugar Land, TX

Cathy, great post and congratulations on getting featured!!  Just because you can get approved for "X" amount does not mean you need to buy that much home. 

Nov 22, 2011 02:17 AM #21
Amy Hayslett

Great post. It is important our clients understand what price fits their budget in addition to what a lender will loan them. I am going to tweet this to my followers.

Nov 22, 2011 02:31 AM #22
George P. Cruz Sr.
DR Horton - Port St Lucie, FL

Great post and valuable information..





Nov 22, 2011 02:45 AM #23
Lesley Alward

Well done!  Your post shows your real commitment to your clients to help them understand the complexities of homeownership.  Excellent graphics too!


Nov 22, 2011 02:54 AM #24
Kathy Schowe
California Lifestyle Realty - La Quinta, CA
La Quinta, California 760-333-8886
Congrats on the well-deserved feature!! Clearly, you are the agent that goes above and beyond- and truly cares how buying a home will impact your clients lives and finances. Great job! Kathy
Nov 22, 2011 03:15 AM #25
Kate Akerly
Halstead Property - Brooklyn, NY
Brooklyn Residential Sales and New Development

Super helpful!  This is the type of added value that encourages consumers to hire brokers for buyer representation.  

Nov 22, 2011 04:23 AM #26
Teri Clardy
Colorado Premier Staging, LLC - Littleton, CO
APSD Certified Home Stager Pro

Great post Cathy.  Every potential home buyer should run these figures before they decide on starting the buying process.  If every realtor sat down and had their client do this it would save a lot of future heartaches.

Nov 22, 2011 04:43 AM #27
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

A few days ago I wrote a post giving my opinion about why a rent payment should be more than a mortgage payment. One of the reasons is that a tenant doesn't have to pay for maintenance.

Those costs can come as a shock to tenants who mistakenly think that a house payment matching their old rental payment will fit the budget.

Nov 22, 2011 05:26 AM #28
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA


Informative post.  Telling people that they need to have a budget and they need to stick to it is very hard.  Most people do not have budgets and no amount of talking about the value of a budget changes their behavior.  You have tied the use of a budget to the buying process.  That makes the idea of budget more palatable.

Nov 22, 2011 06:08 AM #29
Kimo Jarrett
WikiWiki Realty - Huntington Beach, CA
Pro Lifestyle Solutions

An essential step to determine short and long term goals and objectives after securing the personal financial information. Had RE agents and MLO's taken the time to discover this information, I believe many buyers would have opted out and waited for another or more suitable opportunity. Excellent post.

Nov 22, 2011 09:04 AM #30
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

I rthink the attitude people used to have was to buy as much home as the bank would allow them to buy. However, people are getting more conservative.

Nov 22, 2011 09:33 AM #31
Connie Harvey
Pilkerton Realtors - Brentwood, TN
Realtor - Nashville TN Real Estate

Cathy, so much great information for first time home buyers! Very well written!

Nov 22, 2011 09:44 AM #32
Cathy Criado
Criado Realty - San Antonio, TX
Making Real Estate Profitable

Thank you to all the FAB-U-LOUS people who added comments today. I apsl appreciate those who hit the "subscribe" button - and I know you know who you are.

Since we are all spending time with family I'll be brief on my commenters - Thank you.

One comment stood out to me as a concern. While I greatly appreciate all comments, and it is a discussion forum, I need to clarify as I am concerned that my blog may have been taken out of context to some degree by at least one blogger.  I was featured last month on rent vs own, the real cost of owning (125 comments +). I ran a financial equation comparing a $1200 payment for rent vs. a home with a $1200 mortgage and included the cost of acquisition and disposition, and only assumed 1% appreciation of over 10 years. The results were in the neighborhood of a $48,000 gain vs. a $144,000 expense. In my humble opinion it is wise to run numbers on these types of scenarios. On occasion, on a short term basis or highly uncertain market, etc. then maybe renting is better.  Lots to consider that's for sure.

Nov 22, 2011 10:01 AM #33
Dimitri Matsis-REALTOR® (818) 599-6083
Troop Real Estate Inc. Westlake Village CA - West Hills, CA

Hi Cathy,

Very informative and detailed. Bookmarked it. Have a great Thanksgiving!


Nov 22, 2011 10:14 AM #34
Bob Miller
Keller Williams Cornerstone Realty - Ocala, FL
The Ocala Dream Team

Wow Cathy,  As an engineer and a numbers person you knocked my socks off.  Great post & data!

Nov 23, 2011 12:06 PM #35
Roshan Quigley
Weichert Realtors - Manalapan/Marlboro, NJ - Manalapan, NJ

Maybe if some of our short-selles would have analysised more of their expenses before purchasing the housing market would not be in the current situation we are in now.  Great tool for all buyers.

Nov 26, 2011 03:26 AM #36
Jacqui Jeffress

What a great idea!  Anything we can do to help first time buyers will ultimately turn them into life time clients.  You have gone above and beyond.

Nov 28, 2011 02:53 AM #37
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Cathy Criado

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