How Much Should You Spend On A Property?

Have you decided to buy a house but aren’t sure how much you should spend? In this video, I’m going to break down all the expenses of homeownership so you know exactly how much you can afford. We’ll look at everything from your mortgage payment to taxes so you can create the right budget for your situation.

Before You Start Home Shopping

Congratulations on deciding to buy a house. Have you thought, though, about how much you're going to spend? Buying a house is exciting, but it can get very emotional. If you let emotions get the best of you, you can find yourself in a bad situation.

It’s important to understand that, when you buy a house, you're committing to a monthly payment—often for 30 years. That's quite a long time, and a home is usually the largest investment a person will make. So before you get in the car and decide to go look at houses, it's important to know how much house you can afford and how much you're going to be spending per month on that house.

One of the things that the service has ingrained in all of us is discipline. I want you to take that approach as we look into the budgeting, financing, and mortgage of your home, applying the discipline and knowledge you already have into your investment.

Your Monthly Budget

The first thing we want to do is break down your monthly budget, itemizing all the expenses that you have to get things cleaned up. That way, you're accurately portraying your budget—including the lifestyle and things that you need and want. Because homeownership is extremely involved, we want to understand where every single expense is coming from.

Either before or as you start searching for a home, I recommend looking at the numbers and working them backward.  A good place to start is looking at your BAH and what you can afford with that VA benefit. For example, if your BAH is $2,000, you want to look at what your monthly mortgage would be to include homeowners insurance, utilities, and all those other expenses. You can then apply that to how much home you can afford.

While this isn't always a perfect example, it at least gives you a place to start bracketing where your budget is. Remember, when you buy a house, the largest payment you're going to make each month is your mortgage payment. This goes right to the bank.

Using Your BAH and VA Benefits

Buying a home and utilizing your BAH and VA benefit together is a great idea. When you get to BAH, you're going to get a tax-free stipend. For example, if your BAH is $2,000 a month, that $2,000 a month over 12 months is $24,000.

If you're renting a place and you're paying somebody $24,000 a year, wouldn’t you rather buy your own property and put that back in your pocket? Even if you sold that house flat out for the same price you purchased it for, you would be putting that $24,000 right back into your own pocket—which is what makes you money.

If you're curious about how that works, check out my other videos that focus on the tax advantages of homeownership.

Property Taxes and HOAs

The next expense after your mortgage is your property taxes, which will be paid each month. The funds will go into escrow, a third party that’s going to hold the money so you can pay it throughout the year. So if you owe $12,000 of property taxes, you’ll divide that by 12 and pay $1,000 per month.

Another expense that's extremely important to know about is HOAs, or homeowner’s association fees. The HOA takes care of your community, including all public and shared places around your house. This ensures everything looks nice and provides guidelines for how the community is going to live and coexist together.

So whether it's the rules at the pool and parking on the streets or where you're going to park your RV, HOA fees are another expense that we want to put on the ledger—depending on what home you purchase and where it's located. If your home does have an HOA, you're probably going to have extra amenities that you're sharing with the rest of your community like a pool, playgrounds, pocket parks, walkways, RV parking spots, and more.

Private Mortgage Insurance

Another expense we want to talk about is private mortgage insurance, or PMI. You're only going to have this expense if you do not use a VA loan. If you’re a veteran, we’ll use the VA loan to maximize your benefits and alleviate that expensive PMI.

If you aren't a veteran or you decide that you don't want to use your VA loan—which is right for some folks out there—you are going to have that additional PMI expense. This cost can be anywhere from $200 to $800.

Finding Your Dream Home

I hope this helped set your expectations and assisted you in planning the purchase of a home at your next duty station. Knowing the breakdown of these costs is important, as they all encompass what your monthly payment is going to be. You can then budget for your expenses and find a house that isn’t way out of your price range.

The absolute last thing that we want is for you to go look at home, get emotionally attached, fall in love—and then find out that it's $500 out of your budget. So if you have any questions, feel free to reach out to me and I’ll be happy to help. I specialize in selling homes throughout San Diego County around Camp Pendleton, but if you're looking to buy somewhere else, I have a network of veterans that are willing to assist you.

Don’t forget to subscribe to my channel so you never miss an episode of my show, all about San Diego real estate. And remember, I'm more than willing to be your boots on the ground and help you with your next relocation!