Read this Guide Before You Buy a House

Many families dream of owning a home. Some even plan to build their nest before starting a family. But before you put a downpayment on that house you have been eyeing for a while, ask yourself first, "Can I afford to buy a house?"

Your bank or realtor can tell you the maximum you can afford for a house. However, there are many hidden costs to buying a house. The least you want is to become house poor, going into debt just to finance your home.

To avoid buyer's remorse and loss of ROI, first answer: "How much can I responsibly spend on a new house?" Budgeting for a house includes more than saving for a down payment and planning for mortgage payments. There are unexpected costs like non-equity fees, setting up utilities, insurance, and property tax.

Remember, a house is an illiquid asset. It is vital to have emergency funds and enough savings before you buy a house. While job stability is important, you should be ready for unforeseen events that can change your financial condition such as job loss or a decrease in income.

ALSO READ: 8-Year-Old Boy Starts Business, Buys His Family House and Car

How Much Should I Budget for House Payment?

"How much house can I afford rule of thumb" is one of the most-searched queries for those interested in homeownership. However, nearly 40 million American households exceed the recommendation for budgeting for house payment, Motley Fool reported.

It is important to consider other expenses and financial goals. From your paycheck, you will deduct at least 20% for savings. Then, you may be saving up for retirement and college for your kids, too. If you have savings for a down payment, yet do not have an emergency fund for at least 6 months of living expense, then you may not be ready to buy a house.

Can I afford a house based on my salary?

The rule of thumb is, 28 percent of gross monthly income for home-related costs, and 36 percent for all kinds of debt, Nerd Wallet revealed. So you may ask, "how much house can I afford based on monthly payment?" Here are the steps to follow:

Add total monthly income

In a dual-income household, add the combine take-home pay monthly. Include any other streams of income including part-time jobs.

Determine maximum mortgage payment

To do this, multiply your total monthly income by 25 percent. If you earn $5,000 monthly, your house payment should not exceed $1,250 a month. Keep in mind, this should include other ongoing costs of homeownership.

Budget with the help of a mortgage calculator

Your monthly housing budget will also depend on the terms of your mortgage plan. However, keep in mind that mortgage calculators do not factor-in homeowner's insurance, monthly homeowners' association fees, and property taxes that will take a slice off your monthly housing budget.

Budget for ongoing housing costs

While your emergency fund will cover major home disasters and unexpected housing expenses, you need to budget for other upfront and ongoing housing costs. This includes new appliances, utilities, ongoing repairs, and routine services like pest control.

Things to Budget for When Buying a House

Down payment - "How much should I save for a down payment?" the answer is 20 percent of the home value. That is, for a $300,000 house, the down payment would be $60,000. If you cannot pay 20 percent in down payment, there are additional expenses like private mortgage insurance and an increased risk for serious financial problems.

Closing costs - Other upfront costs include closing costs which can be up to five percent of the home value or $15,000 for a $300,000 house.

Moving expenses - A local move costs around $1,000, long-distance relocation costs nearly $5,000 for 1,000 miles.

Setting up utilities - You will need to get your house connected to the basics: water, electricity, and sewage. If you buy an existing home, you may still need to update the utilities.

Furniture and appliances - If you are wondering how expensive is it to furnish a house? The average homeowners spend on a 3-bedroom house is $30,000 for the bedrooms, $12,000 each for the living and dining spaces. The grand total for a 2,000 square feet home is over $80,000 in home furnishings.

Maintenance and repairs - Set aside one percent of the home value for annual maintenance and repairs.

Property taxes - The bigger the home, the higher you pay in property tax.

Homeowners' association dues - Learn the rules or you may end up paying a bigger bill than expected.

ALSO READ: Easy Steps on How to Save for a House That You Dream to Have