How to Determine Your Budget for Buying a Home: A Step-by-Step Guide

By Melissa Elliott, Your Real Estate Wrangler of North & East Texas

Let’s talk money—but don’t worry, I’m not about to throw confusing lender lingo at you. I’m talkin’ real-deal, step-by-step guidance to help you figure out what kind of home you can actually afford—without gettin’ in over your boots.

Buying a home is exciting (heck yeah it is!), but if you don’t set a solid budget first, you might fall in love with a home that’s out of range—and that heartbreak ain’t fun. So here’s how to wrangle those numbers and set yourself up for a smooth ride.

1. Look at Your Monthly Income (The Real Stuff)

Start with what’s comin’ in each month—after taxes. This includes your main job, side hustles, or any consistent income. Be honest with yourself here—don’t count rodeo prize money that might come in. 

2. Track Your Expenses (Yes, All of Them)

Time to check the trail map. List out what you’re spendin' monthly—groceries, gas, insurance, subscriptions, daycare, that weekly stop at Buc-ee’s… it all adds up. This gives you a clear picture of how much wiggle room you have.

3. Know Your Debt-to-Income Ratio

Lenders love this number. They typically want to see your monthly debts (like car payments, student loans, credit cards) take up no more than 36-43% of your monthly income. The lower the better. If that ratio’s too high, it’s time to pay down some debt before you saddle up.

4. Factor in the Extras of Homeownership

Your mortgage isn’t the only monthly cost. There’s also:

• Property taxes (yeehaw, Texas!)

• Homeowners insurance

• Utilities (bigger house = bigger bills)

• HOA dues (if applicable)

• Maintenance and repairs (homes don’t fix themselves, darlin’)

A good rule of thumb? Budget about 1% of the home’s value per year for upkeep.

5. Get Pre-Approved by a Trusted Lender

This ain’t just a formality. A pre-approval tells you what a lender is willing to let you borrow, based on your income, credit, and debts. But here’s the trick—just because they say you can afford a certain amount doesn’t mean you should. Stick to what’s comfortable for you.

6. Decide What Monthly Payment You’re Comfortable With

This is your ride, not the lender’s. Think about what monthly payment would let you still enjoy life—nights out, vacations, kids’ activities, and maybe a few rodeos too. Don’t stretch yourself so thin that you’re house-poor and stressed out.

7. Add Up Your Down Payment & Closing Costs

The more you can put down, the better—but there are options out there even if you don’t have 20% saved. Just don’t forget about closing costs (typically 2–5% of the home’s price). I can help you estimate all of that so there are no surprises at the finish line.

Bottom Line: Know Your Numbers Before You Ride Out

Determining your homebuying budget is the first and most important step of the journey. It sets the pace and helps you focus on homes that make sense—not just dreams that drain your bank account.

And don’t worry—you’re not ridin’ solo. I’ve helped buyers from all walks of life find the right home at the right price. I’ll connect you with top-notch lenders and make sure you understand every step along the trail.

Ready to crunch the numbers and start your home search with confidence?
Call or text me, Melissa Elliott, at 214-450-5473. Let’s figure out your budget and find you a place that fits just right.