Prepare financially for buying a home, assess your current spending habits, evaluate your affordability by understanding your income and expenses, establish a long-term financial plan, and clearly define your financial goals.
Article: 5 minutes
Updated: August 29, 2026 Published: August 28, 2018
By: USAA Reviewed by: Editorial contributors
Before purchasing a home, it's crucial to assess your financial present by tracking spending, determining how much house payment you can comfortably afford and considering how long you plan to stay to recoup closing costs.
Becoming a homeowner takes careful thought and consideration. It's important to know how it can affect your finances in the long run. Start by asking yourself these questions.
Before imagining your financial future, it's important to have a clear understanding of your financial present.
That doesn't necessarily mean you need a rigid budget, but you should have a good idea of how much money is coming in and where it's going every month. You may already know your biggest expenses, like rent, car payments and insurance, but other expenses might fall into the "where did it go" category.
For the next two months, track where every dollar goes and determine whether you're able to make cuts if needed. This helps you know how big of a house payment you can afford comfortably and confidently.
After evaluating your monthly cash flow, decide just how big of a house payment you can manage. The monthly payment will include principal and interest as well as property taxes and insurance.
One rule of thumb suggests that your housing expense should stay between 25% to 36% of your take-home pay. If your family brings home $5,000 per month after taxes, your mortgage payment, including taxes and insurance, should be between $1,250 and $1,800. Keep in mind, just because you can theoretically afford a higher house payment doesn't mean you should.
Keeping your home and monthly payment manageable helps give you the financial flexibility to manage other expenses. The size of your house may have financial impacts beyond your payment. For example, more rooms mean more furniture, more upkeep, and higher heating and cooling costs.
The more time you plan to spend in a home, the more sense it makes to buy it.
The biggest reason is closing costs, which are some of the heftiest upfront expenses of buying a home. They cover appraisal fees, document preparation, loan origination and discount fees, flood-zone evaluation, title insurance, and more. Closing costs can range from about 2% to 5% of the purchase price, and unlike your down payment and principal payments, these expenses can put a strain on your cash.
If you own a home for a short amount of time, you're less likely to recover these costs through an increase in the property-market value. Bottom line: If you think you'll move in three years or less, renting may be the smarter move.
Your commitment to a certain house payment should reflect your confidence in your job and income. For example, if you're in an industry that's experiencing layoffs or you're compensated on sales commissions, you should only take on a payment you're confident you can sustain during leaner times.
You should also consider the possibility that someone who's currently working may stop doing so, such as a parent who opts to stay at home with children or a breadwinner who's eagerly eyeing retirement. Potential income losses could impact your ability to cover a high house payment.
It also makes sense to evaluate the likelihood that you may be moving to a new area to take advantage of a new job opportunity. Owning a home makes moving more complicated, and a potential future move should be considered in your decision.
In addition to closing costs, you'll also need money for move-in expenses, such as furniture, drapes, lawn mowers, snowblowers and other things you'll need to be comfortable in your new home.
Beyond that, you'll want to have a cash cushion to pay for repairs and other unexpected expenses that go beyond your home. Consider setting aside enough cash to cover your living expenses for three to six months.
Homeownership is sometimes equated with the American dream, but there's much more to a rich and fulfilling life than where we live. Rather than buying the most expensive house you can afford, consider the other things that will make you happy now and in the future.
In addition to leaving room in your finances for things such as travel, dining out, new cars, children and personal interests, you should also have ample cash to regularly save at least 10% to 15% of your income. That money could help you reach other important goals such as retirement and college expenses.
Learn more about USAA Bank mortgage loans.