Murrieta Real Estate Financial Considerations Back to Communities - Murrieta Homes

Gettng Your Finances in Order

Before making a final decision about buying Murrieta real estate, it is essential that you put your finances in order. Evaluating your finances and constructing a financial plan, such as a comprehensive budget, are tasks you will have to undertake before searching for your new Murrieta home and a mortgage lender to help you pay for it.

This initial evaluation will enable you to review your spending and saving habits and to develop some short- and long-term goals. Buying Murrieta real estate is part of planning for your future, and neither can be accomplished without you taking charge of your money, which is the basis of financial control.

Constructing a Household Budget

The best way to get a clear picture of your finances is to prepare a budget schedule that shows where you spent your money during the past 12 months. It is advisable to use a monthly budget schedule because expenses will fluctuate greatly from month to month. For example, if you have children in private school or college and the tuition is due twice a year, then those months will require additional cash.

Collecting Information

In your budget schedule, include all your monthly expenses. These expenses range from home mortgage payments to vacations to doctor bills. When preparing the schedule, keep in mind the expenses that could be reduced or eliminated if necessary.

Preparing the actual budget form is not as time-consuming as you might think if you have gathered all the necessary information first. The information you need includes:

• past 3 years' income tax returns
• recent bank statements
• monthly income records from all sources, including pay stubs and records of supplementary income
• rent receipts
• all monthly loan payments, including car payments, alimony, child support, school loans, credit cards or any other long-term loans
• all other ?xed monthly expenses, such as child care, trash removal, cable
  hookup or dues
  
• records of variable monthly expenses, such as utilities, food, househol d maintenance/repair and postage, for the past 12 month s
  • car expenses, including insurance, maintenance, license/fees, gas and oil and repairs
  • • other insurance payments, such as homeowner or tenant insurance and life, health and disability insurance
• records of annual or semiannual costs, such as taxes, tuition or insurance
• records of professional fees, such as physician, dentist, attorney, medica l specialists, veterinarian, hair stylist/barbe r
• medical expenses
• clothing and dry cleaning or laundry costs
• itemized lists of personal entertainment expenses, including eating out , vacations, trave l
• contributions or gifts
• savings and investments

Try to be realistic as you estimate your expenses. Allow for increases that probably will be inevitable—insurance, taxes, school tuition. As you gather your records, take the time to apply for a free credit report to evaluate your indebtedness as well as discover problems or discrepancies that could interfere with receiving additional credit.

If you are self-employed and are thinking about applying for a mortgage, you will need tax returns for the past 3 years and all business records. The mortgage lender will ask for these records, so you should collect them while you are gathering the other information.

At this point, you may realize that you have not saved enough records to draw up a realistic budget. What can you do? First, gather all the records you do have; do not forget itemized credit card bills and canceled checks. Then, save every scrap of information for several months: all incoming bills; receipts from groceries, hardware stores, gas stations, restaurants, movie theaters, parking garages or any establishment where you spend cash; and personal notes itemizing tips, tolls or other fees. After 6 months, add up the total and try to estimate your monthly expenses from all of your records. Add in the fixed monthly, semiannual and annual expenses and begin to develop your budget.

Preparing a Budget

Once you have assembled the pertinent records, you can build a budget. Begin by categorizing all expenses as necessities or luxuries. The objective is to identify those items that are the most financially and personally rewarding and thus worthy of the expense. In the process, you will recognize which expenses can be cut or reduced.

This also may be the time to analyze how a home purchase will affect your budget. You can use your monthly rent as the basis of your housing expenses but add in some estimates of insurance, Murrieta real estate taxes, repairs and maintenance. Think about budgeting for an emergency fund to repair a broken furnace or fix a leak in the roof. This analysis will be only a ballpark figure, but it will be a starting point for developing a more detailed breakdown after you have talked with a mortgage lender.

Include income and expenditures on a household budget form that is divided into months. As you classify information by income source and expense category, sort the corroborating documents into individual files with clear labels. An accordion file folder with labeled tabs is a good way to store the records. In fact, setting up a new file at the beginning of each year is a helpful way to sort papers and bills. This will help you maintain a running record of your budget that is always up-to-date.

If you need any information on Murrieta Real Estate or Property please check our Murrieta Homes section on this website or contact us at any time.