Home Budgeting

The calculator on this page brings together the Housing Expenses that you experimented with in Understanding PITI , the budget that you developed in Budgeting for Home Ownership , and estimated Tax Benefits that you calculated in Understanding Tax Benefits . By aggregating the results from these different calculators into the chart below, a budget analysis is developed to help you understand  how much money you will have left over at the end of each month based on your lifestyle and home purchase decision. (Learn More)

Buying a home will be one of your greatest investments in life, but it should not be your only investment. When planning for a home purchase, it is important for you to consider how much money you want to have left over at the end of each month for investing into a retirement account, saving for your children’s education, or to put aside for a rainy day. To accomplish this, it is important for you to perform a budget analysis for each home or loan that you are considering purchasing.

A budget analysis requires you to look at the big picture to understand how all of the different costs and benefits of owning your home will impact your finances. To get the most benefit out of a budget analysis, you should include your monthly income, lifestyle expenses, PITI payment, and the federal tax benefits that you may receive from making mortgage interest and property tax payments into your analysis. By putting these four pieces together, you can estimate how much money you will have left over each month to put towards other investments or add to your general savings after paying for all of your monthly expenses.

 


Cash flow analysis for first time home buyers
 
THIS SUMMARY PROVIDES ESTIMATES ONLY . Before making any home or loan purchase decision, you should obtain the advice of a professional financial advisor who is aware of your individual circumstances. Please refer to the Terms Of Use  for a complete description of the proper use of this information.

Understanding Your Results

Monthly Bottom Line: This number shows the estimated amount of money you will have left at the end of each month after receiving your income  and monthly tax benefits  from homeownership and paying for your monthly housing payments  and lifestyle expenses . If this number is negative (shown in red), this means that you have more expenses each month than you do income and tax benefits. This is a clear indication that the home you are thinking of purchasing will push you beyond your means and could result in a possible foreclosure in the future. However, if this number is positive (shown in green), this shows that you will have money left over each month after accounting for your income, tax benefits, and monthly expenses.

Monthly Bottom Line is a very subjective number. Although it is clear that you cannot afford your home if this number is negative, it may also be difficult to afford your home if the number is positive. The Monthly Bottom Line shows how much money you will have left over each month to put into other investments or emergency funds. The amount that you should be putting away each month, however, varies with what your financial goals are, what point in your life you are at, and even where you live. It is clear though that the more money you can put aside each month, the better off you will be in the future.

Total Monthly Expenses: This number shows your monthly obligations including your monthly housing expenses and the monthly lifestyle expenses from your budget. Hold your mouse over the different sections of the bar to see these different values.

Total Monthly Income: This number shows your monthly income and the additional tax benefits you may get from purchasing your home. Hold your mouse over the different sections of the bar to see these different values.


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