Owning a home can be a blessing, but if you don’t budget properly, you’ll quickly find yourself grasping at straws to financially stay afloat. To prevent this from happening, keep the following tips in mind when checking out the market and budgeting for your new home.

Create a Monthly Budget

You can’t stick to a budget if you haven’t drawn one up. To make that happen, and to make affording a home easier, you need to be honest and accurate about how much you make and spend each month. 

After charting your spending versus how much income you bring in each month, evaluate your budget and see if you’re comfortable with where you are at or if you can make some changes in order to reach your financial goals more easily. 

This will help you decide how much you can save up for your down payment, and how much you can comfortably put toward monthly home loan or mortgage payments.

Build Your Credit Score

Good credit comes before all else when trying to secure a loan. The better your credit, the easier it will be to get a good mortgage rate. Poor credit can do more than give you a high mortgage rate, though — it can completely bar you from procuring a mortgage to begin with. 

Credit.com suggests that the minimum credit score for a home loan approval is somewhere around 620, though it varies from lender to lender. Work on improving your credit score by doing things such as paying your bills on time, keeping balances low on your credit cards, paying off past due balances, and avoiding applying for new cards.

 

Automate Your Savings

If you don’t have one already, create a dedicated savings account. 

Tell your company’s payroll department that you would like a fixed amount of your income sent to that account every payday via direct deposit, and the balance sent to your checking account. This way, the savings will happen on their own, and you won’t have to stress about moving money around on your own. 

So long as you have a good budget established, you won’t even notice that less money is going into your checking account.

Downsize

Saving money now is the best way to have more available tomorrow. 

In addition to avoiding splurging, you can move into a smaller apartment before moving. Think about how much space you really need. If you don’t have kids, you could also live with roommates in a larger home, or alone or with your partner in a studio or one-bedroom apartment. 

Every month, save money that otherwise would have gone toward rent. These savings will add up quickly as time passes, getting you to the 20 percent golden standard recommended for your down payment.

 

Practice Making Payments

This doesn’t mean practicing sending your money away. Instead, get a good estimate of how much you will be paying for your mortgage payments, find the difference between that and your current rent, and put that difference into your savings account each month. 

For example, if you currently pay $700 a month in rent, and most mortgage options you are considering would increase your monthly payments to $1,200, then put the $500 difference into your savings on a monthly basis. 

This way, you will not only have that money saved up for payments, but will also be comfortable putting that much toward housing already when the time comes.

Make a 20 Percent Down Payment

While you can technically pay less than 20 percent for your down payment, you shouldn’t. Reaching this percentage allows you to avoid paying for private mortgage insurance (PMI), and gives you a smaller monthly mortgage payment. 

In general, the more you pay upfront, the less you pay overall. Aiming for at least 20 percent, however, is a responsible standard to help keep your budget in check over the long run.