Preparing to shop

Assess your spending

Before you start home shopping, take a close look at your current spending. For most people, buying a new home means taking on new expenses — whether you are currently renting or already own a home.

You need a clear understanding of how much you’re currently spending to decide what you can comfortably afford to spend on a new home.

What to do now

Take a realistic look at your current spending patterns

There are several ways to look at your current spending.  Choose what works best for you.  Consider one or more of the following:

  • Look at your checking account and credit card history for the last several months.
  • Consider signing up for a personal financial management tool to help track your spending, if you don’t currently use one. Several private companies offer online tools, and your bank or credit union may also offer similar tools.
  • Save your receipts and use our spending tracker to tally them up at the end of the week or month. Or, carry a small notebook with you to record all your expenses. Don’t leave anything out.
  • Active duty servicemembers can also consult their installation’s personal financial manager (PFM) for questions and help with this step.

Draw up an as-is monthly budget that accurately reflects your current spending

  • Make sure to include a "miscellaneous" category. Whether it is a brake replacement for the car or plane tickets to a best friend's wedding, there's always something out-of-the-ordinary.
  • If you make regular savings contributions to an emergency fund or other savings goal, include these in your budget.
  • Look back over several months to make sure you don’t miss less frequent expenses like insurance payments, medical expenses, school clothes, tuition, support for family members, seasonal and recreational costs, gifts, charity, and vacations.

Add up all the categories and compare this budget to your monthly take-home pay

How much is left over?

Check your bank statements carefully to see whether your budget is realistic. If the amount you typically have left over in your bank account each month doesn’t match the amount your budget says should be left over, re-examine your spending patterns to see if you need to adjust the numbers in your budget.


What to know

If you’ve never done a budget or spending plan before, you’re not alone

About half of Americans don’t have a budget. But knowing how you spend your money is an important step in deciding how much you can afford to spend on a home.  Even if you don’t generally like to think about money, it’s doable. It is worth it to spend some time looking at your spending now, as you’re deciding how much you can afford to buy.  Research shows that people who plan carefully for big purchases like a home are much less likely to have financial trouble later.


How to avoid pitfalls

Don’t edit your budget to reflect what you “could” or “should” be spending

The goal here is to assess what you are spending – in the next step you’ll decide what changes you might be able to make in the future.

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Visit our sources page to learn more about the facts and numbers we reference.

The process and forms described on this page reflect mortgage regulations that apply to most mortgages.