Many Americans are thinking about purchasing a home. According to BMO Harris Bank, around 52% of Americans plan to buy a house within the next five years.

Consumers who are considering tackling the home ownership path face a variety of decisions. Where to buy? How many bedrooms? A fixer-upper, or move-in ready? And, of course, several decisions that focus on money.

It’s a smart plan to not choose a house solely because of the amenities or the location within the Minneapolis area – you must also consider how much your budget can actually afford. Do you think you know? Consider the following to see if you are on track.

To get a good idea of how much house you can afford, consider speaking with a mortgage lender or broker to understand your personal financial situation.

Will My Monthly Housing Costs Change?

Even though you may pay rent every month, that doesn’t necessarily mean that amount of money can be counted on for your mortgage payment. There are other factors involved, such as debt – which will be visited later, that can increase overall monthly expenditures and affect your home buying ability.

Are you Securely Employed?

Unless there is a trust fund lurking nearby, it typically pays to have a stable, full-time job before embarking on the home buying process. Being at the same job – one that lenders could imagine continuing for some time after – for at least a year is what many tend to aim for.

Do you Have a Healthy Down Payment Saved?

Before considering the purchase of a home, realize that most consumers usually need a minimum of several thousand dollars on hand in order to successfully secure their new home. This is true whether you’re looking at Minnesota luxury real estate, or anything else. Additionally, home buyers will need extra cash after closing for a certain number of house payments, as well as any unexpected repairs or new home needs that typically crop up after buying a new home.

Consider Your Income

It’s essential to weigh several aspects of your specific financial and personal situation before deciding on buying a home.

Sit down and calculate out how much your monthly income actually is. This is often the first step to determining your housing budget. Consider potential raises, bonuses, and any commissions that are likely to come your way.

Take Note of Personal Debts

Even though you have income, most people also have debts. Debt that includes credit cards, student loans, and vehicles can easily take quite a bit out of your monthly payments, leaving little to pay a new mortgage. Smart consumers take these into consideration when deciding on their house purchasing plans. If you have a lot of debt, you may have to move your targeted home price down a bit. Debt can also affect your mortgage application in a number of ways, making it even more important to keep track of any debts you may have.

Look at Your Current Rent 

While your rent doesn’t automatically prove the amount of house payment you can handle, it does show how much of your income is used for living expenses. By understanding on how comfortably you can manage your rent payment on a monthly basis, you should be able to understand how much you might be able to handle a new house payment.

Are You a Home Improvement Person?

Handy people who can tackle home improvement projects and repairs might save some money over people who are not used to fixing and repairing things on their own. Before purchasing a home or Minnesota condominium, decide if you can handle leaky faucets, blown fuses, and basic maintenance yourself or you may have to hire a professional. Handy people may opt to buy a fixer-upper to save some money, while other, less handily inclined folks may be better off springing for a home that is move-in ready.

Weigh Taxes and Insurance

Remember that rent payments are not always indicative of the mortgage you can afford. Taxes, insurance, and homeowners association fees are often added to a mortgage payment, making a new homeowners house payment higher than what they may have expected.

Buying a home often means paying property taxes. If you are concerned about property taxes and how much they may be from location to location, investigate the areas that you are thinking about living in and find out about the tax rates. For homeowners insurance, speak to an insurance provider for information on insurance premiums. It’s important to consider these items outside the normal mortgage payment when considering your home buying budget.

Think About Utilities

A large home with lots of windows may result in higher utility bills than a smaller apartment’s electric bill.

Plan on a larger utility bill for electricity when planning on buying a house. Also note that in many cases, a homeowner may also be responsible for items an apartment renter is not. Items such as water, sewer and trash pick-up may have been included in the rent before, but will need to be paid by the homeowner once a home is built.

How Much Down Payment Will you Make?

In general, larger down-payments make the mortgage process a bit easier. Mortgage companies often like to see home buyers with 20% down, but there are programs such as FHA that require less money on the front end. There are also other loan programs, such as VA and some conventional loans that will accept lower down payments. Work with your mortgage lender or broker to find out which loan is best for you and your financial needs.

Potential home owners must seriously review several facets of their finances and lifestyles before embarking on the journey of purchasing a new home. By carefully weighing each of these components, you are more likely to arrive at a home buying budget that works for your finances now and in the future.