Your first home can be a great investment, or it could be the biggest financial mistake of your life, especially if you don’t prepare yourself financially beforehand. Fortunately, there are plenty of steps you can take to ensure that the best outcome happens, and that means you’re ready to buy that house as soon as possible! First, though, let’s talk about budgeting, one of the most important parts of the process. Here are seven tips on how to budget to buy your first home.

1) Know How Much You Can Afford

You'll want to research how much you can afford for a monthly payment towards your housing expense. For example, if you plan on living in an area where the median home price is $200,000 and the median family income is $60,000 then you can afford a monthly payment of about $1,333. This means that your monthly budget should be about $2,666 per month including your housing expense and other necessities.

2) Get Pre-Approved for a Mortgage

Getting pre-approved will also help you narrow down your search and make it easier for you to find a house that fits your needs. To start, work with a lender to create a budget and determine how much of a home you can afford. Then, speak with a mortgage broker about what kind of loan programs are available in your area and which best suit your needs. If everything checks out and you're approved, congratulations! You are now ready to buy a first home.

3) Create a Realistic Budget

Create a realistic budget to get to your ideal downpayment amount. Start by setting a goal to save as much money as you can, and then calculate what monthly payment you'll need to buy the home of your dreams. Take this number and divide it by 12, which will give you an idea of how much money you'll need each month in order to reach your goal.

4) Save for a Down Payment

Start saving money as soon as you can. Take action and stick to your budgeting plan. The more you save each month, the faster you will reach your goals of buying a first home!

5) Shop Around for the Best Mortgage Rate

Shop around to get the best mortgage rates. Speak to several lenders and ask them what rates they offer, what fees they charge, and if they offer any discounts or incentives. You can also consider shopping around for a mortgage broker who will shop around on your behalf. Once you find a lender you like, sign up with that bank and start saving money every month to meet your goals faster!

6) Consider Buying a Less Expensive Home

This doesn’t mean you should give up your dream of owning a home, it just means that you’ll want to consider buying a less expensive home than you were initially planning. The more affordable your home is, typically, the faster you can pay off your mortgage and become a homeowner! If a $200k house will stretch you too thin and make it hard to live your current lifestyle now, consider purchasing one that costs less.

7) Get Help From a Financial Advisor

Talk to a financial advisor on how you can start saving more money and to see what you can do to start budgeting better. You may be able to save by getting rid of expensive subscriptions or by just not eating out as much. The more money you save each month, the faster you will reach your goals.