Financial Advice

How to Build a Budget When Buying a Home

There are many upfront and ongoing costs when you purchase a home, and your regular monthly expenses can also change. Understand how to build your budget so you can be a prepared homeowner.

Published Apr 7, 2021 | Updated May 8, 2024

Today, Monica Munoz Andry, UFCU Financial Health Program manager and one of our financial experts from UFCU, talked to us about preparing to buy a home.

So, tell us, what should we consider when first thinking about buying a home?

More than 70% of Americans consider homeownership to be an important part of the American Dream. It’s a very important decision, and several costs need to be considered outside of the monthly mortgage payments.

Upfront costs like:

  • A down payment can be somewhere between 0-20% depending on the type of loan program.
  • Or Closing Cost, which can be anywhere between 2-5% of home value.

Ongoing costs can also include:

  • Maintenance and repairs.
  • Utilities.
  • Homeowners’ association or condo fees.

It’s best to do the math and use a mortgage calculator that lets you get a feel for what you can afford and what costs you can expect.

What are some financial considerations we should be aware of as we prepare to buy a home?

For many people, the biggest obstacles to homeownership are low credit scores and paying off current debts.

To prepare for future homeownership, you should improve your credit score. You can check your credit report for free at and make sure it’s accurate. UFCU also offers a free credit review consultation that can help you assess where you are. In addition, strive to make on-time payments for all bills and avoid getting further into debt.

It’s also good to examine your current spending and create a budget.

Pay down your debts to improve your debt-to-income ratio. Your DTI equals your monthly debt payments divided by your gross (or pre-tax monthly) income. When looking at ways to pay down debt, focus on revolving debt first, which includes things like credit cards.

Save up for a down payment and other upfront costs, like new appliances or furniture.

We’re all so excited to buy a home that we often forget about what comes after. How else will buying a home impact our monthly expenses?

Buying a home may change some of your monthly expenses, especially in the areas of:

  • Housing payment, which can include maintenance and repair costs, as well as property taxes which may change from year to year.
  • Transportation — a new home can mean a new commute, which will affect your transportation expenses like gas, tolls, or maintenance.
  • Homeowners insurance may be a bit higher than renters insurance based on the value of the home.
  • And your utilities may be higher or lower depending on the size difference from your current home to your new one.

It’s good to consider these costs when re-doing your budget to make sure you are prepared for all that comes with being a homeowner.

How can a financial professional help with this process?

That’s a great question. Working with a financial professional may help you:

  • Establish a realistic housing budget.
  • Identify mortgage programs that allow you to buy a home for a lower down payment or with a lower credit score.
  • Compare different loan estimates.

When thinking of homeownership, it’s key to reflect on your situation and consider your reasons for buying a home, budget, needs, lifestyle, and finances. This will help you better identify an ideal time to buy a home. As a top Mortgage Lender in Central Texas, UFCU is happy to help you achieve your homeownership dream.

Again, we’re thrilled to have UFCU representative Monica share financial advice regarding homeownership.