One of the first steps in the homebuying process is fully understanding your finances.
Evaluating your budget will require a little homework and determination, but will pay off by helping you determine how much home you can afford.
Housing counselors can help you assess your financial situation, build or improve your credit and ensure you're well-prepared for homeownership.
To calculate your monthly spending, consider the following:
- Child care
A recent Freddie Mac report examined these costs and their effect on homebuyers’ ability to buy or rent a home. The research found that while the average family income (two adults, two children), has grown by 18.7% from 1990 to 2018, when adjusted for inflation, child care costs have increased by 49%, education expenses have grown by 90% and housing increased by only 14%. By comparison, costs for transportation and food remained flat in real terms during the period, while the cost of apparel declined.
What does this mean in terms of monthly spending?
- That national median mortgage payment in 2018 was $1,566 while the national median rent was $899.
- While student loan payments have risen, they are far less than monthly child care expenditures, averaging about $378 per month.
- Families spend, on average, $715 a month on child care. For families with younger children, the cost is steeper at $948.
The data highlights both the impact of monthly expenses and the value of weighing them against your ability to purchase a home. To help you start this process, consider contacting a housing counselor who can help you assess your financial situation, build or improve your credit and ensure you're well-prepared for homeownership.
For more tips to help you on your homebuying journey, visit MyHome® by Freddie Mac.