Your Budget

Having a budget is smart and sensible. We all know this. And before you make one of the biggest purchases of your life, it's important to have one planned out. Mortgage payments will affect the rest of your expenses. So you need to work out just how much money you can afford to spend on house payments each month in order to know your limits. It may take time to put a budget together, but the information is worth it in the end.

Here are some of the things you'll need:

• All current monthly loan payments.
• An estimate of what your new mortgage payment will be. You can find free mortgage rate calculators online.
• All other monthly expenses (such as child care, dues, etc.).
• Records of variable expenses (for example, utilities, food and car repair) from the last 12 months. This will give you an estimate of your monthly expenditures.
• Records of annual or semi-annual expenses (such as insurance and taxes).
• Records of other non-fixed expenses (for example, medical expenditures) for the last year. This will give you an estimate of average expenses of this type.
• An estimate of personal expenses (entertainment, travel, etc.)
• A current copy of your credit report. It will show your total debt and monthly obligations.

Tips on saving money.

Be realistic. Allow some leeway for possible increases in certain expenses, like tuition or medical expenditures. It's better to underestimate than overestimate.

Don't Spend More Than You Make. Most people are shocked when they figure up how much they spend each month. It's typically significantly more than their income. This is the best way to sink further and further into credit card debt. Watch out for this trap.