I may come back to saving on discretionary spending but a convo had with a friend last night makes me think this aspect is much more important.  JUST BECAUSE YOU CAN AFFORD A MORTGAGE DOES NOT MEAN YOU CAN AFFORD A HOUSE!  The fact you that you pay $900/month for rent doesn’t mean you can afford a $900/month mortgage.  Why not, you ask.  Because there’s a lot more to it than just paying the mortgage.

When you use those nifty online calculators that tell you how much house you can afford, it only gives you principal and interest (P&I) which may well be $900/month…BUT wonderful homeowner you are, you have to pay property tax and homeowner’s insurance now. Generally speaking, neither one of those is cheap.  Unless you have a downpayment of 20% or more, you will usually have to pay into an escrow account.  This means you pay property tax and insurance along with your mortgage every month and the mortgage company pays those two bills for you.  So you thought you’d be paying $900/month but you’re really paying $1050/month (for example).

Also, if you live in a townhouse or condo (and sometimes for single family homes too), you will be paying HOA fees.  For a nice complex, you can expect $100+/month.  Depending on where you live, this might cover garbage and/or water and it generally covers basic outdoor maintenance.  So now your $900/month mortgage has turned into $1150/month and you haven’t paid any other bills or bought any groceries.

Your utilities will probably go up, especially if you have natural gas heat (vs electricity).  And guess what else?  Houses need stuff.  No, you won’t buy all that stuff at once but for the first year, expect to drain your wallet on “house stuff”.  From lawnmowers to towel racks to blinds, there will ALWAYS be something you need to buy and I’m not even talking about decorating for real.  So you should budget an extra $250/month for increased utilities and “stuff”.  Now a $900/month mortgage has turned into $1400/month of expenses.  Still think you can afford it?