# How to Budget Saving up for a House

For many people, a home is the biggest purchase they will ever make. While home buying can be confusing all on its own, saving up to buy a house can be even more confusing. Before you take the path less traveled and skip down the road to home ownership, understand the costs associated with buying a home and how to properly save for those costs.

-Down payment (3 to 20 percent of the purchase price)

-Closing costs (3 to 6 percent of the purchase price)

-Home maintenance and repair (1 to 2 percent of the purchase price, annually)

Figure out how much home you can afford

Instead of subscribing to conventional wisdom, assuming that you can take on a loan that is four times your income, work backwards to establish your budget.

Calculate how much you can afford each month as a total house payment. Then, subtract your projected property taxes and homeowner’s insurance. Use that number as your baseline for a payment.

For example: If you are comfortable paying \$1,500 a month, start here. Assume your property taxes and homeowner’s insurance will account for approximately one-third (30 percent) of your mortgage payment. Subtract that from \$1,500.

\$1,500 – 30 percent = \$1,050

Multiply \$1,050 by 30 years –the average mortgage term—and you will see that you can afford a house in the \$300,000 range.