Buying a home is a major milestone — and one of the most important financial decisions you'll ever make. Whether you're drawn to a quiet suburban neighborhood or a lively urban setting, setting a realistic homebuying budget is the first step toward confident and prepared homeownership.

This guide breaks down the key costs involved in buying, owning, and maintaining a home so you can plan smart and avoid surprises down the road.

1. Know What You Can Afford
A simple way to estimate your homebuying budget is to multiply your annual gross income (before taxes) by 2.5. This gives you a ballpark figure, but it’s not the whole picture.

Here are a few more factors to consider:
• Credit Score: The better your credit, the better your mortgage options. A higher score can get you a lower interest rate and better loan terms.

• Mortgage Rates: Even a slight change in rates can significantly affect your monthly payments and overall affordability.

• Other Upfront Costs: Beyond the down payment, you’ll need funds for closing costs, moving expenses, and other incidentals.

2. Plan for Your Down Payment
Depending on your loan type and credit profile, your down payment will typically range from 3% to 20% of the home’s purchase price.
If your down payment is less than 20% on a conventional loan, you’ll likely be required to pay private mortgage insurance (PMI) until you build up 20% equity in the home. This extra monthly cost can add up, so you may want to consider saving for a larger down payment if possible.

3. Account for Closing Costs
In addition to the down payment, you’ll also need to budget for closing costs, which usually range from 2% to 5% of the purchase price. These costs can include:

• Appraisal fees

• Credit report fees

• Loan origination charges

• Title insurance

• Government recording fees

• Escrow and processing costs

4. Prepare for Move-In and Ongoing Costs
There are several new expenses that come with homeownership, especially in the first few months:

Initial Costs

• Moving services

• New furniture

• Paint and repairs

• New appliances

Monthly Costs

Your monthly payment could include:

• Mortgage principal and interest

• Property taxes

• Homeowners insurance

• PMI (if applicable)

• HOA fees

• Escrow payments

Maintenance

Regular upkeep is part of homeownership. Common tasks include

• Lawn care

• Plumbing and HVAC maintenance

• Gutter cleaning

• Appliance repairs

Planning ahead for these recurring costs will help you avoid financial strain and keep your home in top shape.

5. Create a Budget That Works for You
Most experts recommend spending no more than 28% of your gross monthly income on your mortgage payment and no more than 36% on total monthly debt (including loans and credit cards).

When building your homebuying budget, don’t forget to factor in your current lifestyle and any future plans, such as:

• Car purchases

• Family trips

• Tuition expenses

• Childcare

• Retirement contributions

Having a realistic view of your full financial picture — not just your mortgage — will help you stay comfortable and financially secure after you move in.

Final Thoughts
Creating a thoughtful, well-rounded homebuying budget helps set the stage for long-term success and peace of mind. Peace of mind in homeownership comes from knowing you have accounted for all potential expenses, allowing you to enjoy your new space without financial stress. By carefully considering your priorities and planning for the future, you can make informed decisions that align with your lifestyle and goals. When you're financially prepared, you can shop with confidence, make stronger offers, and enjoy your new home with fewer surprises.

If you're not sure where to start, connect with a trusted lender and real estate professional who can guide you through the numbers, step by step. They can help you understand your budget, explore financing options, and identify potential properties that fit your needs. With their expertise, you'll be better equipped to navigate the home-buying process and make choices that lead to long-term satisfaction. The more informed you are, the better your decisions — and your future — will be.