Choose your housing

Housing  

At this point you should have found your job, calculated your net pay, split it up into sections and saved it on to your h: drive.  Your first section is: housing where you devoted between 30% and 35% of your yearly net income.  You also compared owning a home to renting a home and now its time to pick out a place for your budget assignment.  If you have not completed these steps click the back button and do those assignments! If you have done them, read on!

Open the budget you saved on your h: drive.

You must now decide to either rent, or own.

IF YOU ARE OWNING

Your first task is to figure out how much you can afford for a mortgage.  Of course, there is a little more to owning a home than just paying the mortgage.  For a mortgage you must budget an extra 125 dollars a month for other costs related to home owning.  These include replacement of appliances (dryer, hot water heater, stove, etc), upkeep, utilities, insurance and many other related costs.  So when you compare your monthly payments, add in the 125 dollars before you compare it to your 30-35%.

Now we want to look for an appropriate house.  It should be a house you would live in, be in an area you are comfortable with, and have a style that you find acceptable.  Check out some houses HERE.  Now, once you find a price, add 5% to it (price X 1.05).  This accounts for taxes, inspection, closing costs which add to the price, but also figures in the fact that you can negotiate a lower asking price to begin with.  Then take this number and create a monthly payment using the amortization table HERE.  Enter 30 years as the term and 4.87% as the interest rate.  Find your monthly payments and then add the 125 from above.  Now take that payment and multiply it by 12.  Record this number on your budget sheet under housing and compare it to the money you set aside for it.  If your number falls between the 30-35% then it is a good fit for you.  If it does not, then you need to find another house that does fit within your housing budget.  Once you are happy with the housing, record the yearly payment in the left side of the housing section of the budget and copy a link to the web page with your house in the right side of the housing budget.  Don't be too quick to pick out a house.  It should take several tries before you get the one that is right for you.  Remember to SAVE your budget document to the h: drive when finished!

IF YOU ARE RENTING

As you probably learned renting costs more than owning in the long run.  However there are conditions where you would rent.  If you plan to live in a place less than a year or if your budget is very tight then renting may be a reasonable option.  As you probably guessed, there is more to renting than just paying the rent.  You will have to add 70 dollars to the price per month which includes utilities, renters insurance, and other costs associated with renting.  Don't add these yet, just remember that they exist. 

Now we want to look for an appropriate apartment.  It should be a place you would live in, be in an area you are comfortable with and have a style that you find acceptable.  Check out some apartments HERE.  Now, once you find a price per month, add 70 dollars to it (from above) and then multiply be 14 (that's 12 months plus a deposit of first and last months rent).  If that number falls between the 30-35% on your budget sheet that you set aside for housing, then the apartment may be a good fit for you.  Once you are happy with the apartment, record the payment in the left side of the housing section of the budget and copy a link to the web page with your apartment in the right side of the housing budget.  Don't be too quick to pick out a place.  It should take several tries before you get the one that is right for you.  Remember to SAVE your budget document to the h: drive when finished!