Buying Your First Home: Finance Review

As a Chatham realtor, I understand that buying your first home is an exciting experience. This is the first time you won’t have parents looking after home maintenance, or landlords restricting your freedom with pets, décor, and painting. You now have the chance to use your home as a canvas to express your personality and your lifestyle. Any good Chatham, Ontario real estate agent will tell you to make sure your finances are in order before you get your heart set on a home. Here are tips to ensure you have your finances in check before you make an offer on your home.

Research Your Financial Background

To understand your financial information, you need to first understand where your money is going. Use bank statements and credit card bills to make a list of your costs from the past six months. Feel free to use less, but as a Chatham, Ontario real estate agent, I advise at least six months – the more information, the better your understanding. To better understand where your money is going, make a spreadsheet or find one online.

Understand Where You Spend Your Money

Now that you know how and where you’re spending your money, it’s time to figure out what your money is going to. You may be surprised by what you find. Here are a few areas that I think, based on my experience as a Chatham realtor, are usually underestimated.

  • Income: this includes extra income apart from your day job. This can be government benefits, rental income, or bonuses.
  • House fees: mortgage or rent, property taxes, insurance, utilities, and maintenance or décor costs.
  • Food: groceries and restaurants, as well as those morning coffees.
  • Transportation: car payments, insurance, licensing fees, gas, maintenance, and parking and highway tolls.
  • Communication: cell and home phones, Internet and cable.
  • Children’s Costs: clothing, lessons and uniforms, gifts for birthday parties.
  • Entertainment: alcohol and taxis, health club fees, vacations, and movies.

By keeping track of these costs, you will get a better understanding not only of what you spend your money on, but how to save money, too.

Calculate Your Budget

To calculate your budget, it’s best to use your NET income, rather than your gross. As a Chatham, Ontario real estate agent I find that these are generally appropriate guidelines to follow when figuring out where your income should be spent:

  • Mortgage: 30%
  • Transportation: 15%
  • Debt repayment: 15%
  • Savings: 10%

Sometimes one of these areas is higher than another. That’s okay as long as the rest are slightly lower to balance the budget. If every area is higher than these guidelines, you probably need to rethink your budget and spending. You need to make sure you have a proper understanding of where your money is going in order to financially prepare for buying a house.

Begin Saving Money

The three major steps to take in order to get your finances in order are:

  • Prioritize your spending. Know where you’re spending too much on inessentials that you could want to use for future big buys, like a home.
  • Track your spending. When you begin to list where you’re spending your money, it will allow you to be more conscious of your spending.
  • Create a budget. Figure out how much money you need for basic expenses before you decide how much to spend on luxuries.

If you’re ready to buy your first home and need a Chatham realtor or if you just need information on mortgages, give me a call at 519-360-0141.