Buying a house is likely the largest purchase you will make in your life, so it goes without saying that this is not an impulse buy but one in which preparation and research are key. Find an area that favors the buyer, in Canada for example, Calgary real estate is a buyers’ market. The market favors buyers when home prices are relatively low and there are a large number of homes available at a given time. Before you even begin the buying process, you need to ensure that your personal budget is in check. Below are 5 ways to budget to buy your dream house. 

1. Write Out Monthly Income and Expenses

The first step in building your budget is to list your basic income. Your pay stubs and checking account statements should provide your take-home pay. Because some expenses are intermittent, such as insurance payments, you’ll get the most accurate financial picture if you calculate an average for six months to a year. Add up everything you spent for the last six to 12 months and then divide by the number of months, which will give you your average monthly expenses. 

2. Pay Off Debt

The challenge when buying a home is when you already carry a large amount of debt. This is what the mortgage company uses to decide how much home you can qualify for. The key is to determine the best use of your dollars so as to reduce debt while being able to manage a mortgage payment. Put simply, consider a mortgage payment low enough that you still have funds left over to put toward debt, if applicable, or to savings. In other words, don’t bite off more than you can chew.

3. Cut Back and Begin Saving

A few ways to cut back spending you may not have thought of. Can you reduce your cell phone bill or even downgrade your plan? Buy in bulk or get rid of gym membership and exercise at home and/or outside. Use reusable water bottles – fill them up with water and stick them in the fridge. Switching banks can save you $20 a month and make absolutely no difference at all in your day to day life. Sign up for the customer rewards programs at the places you already shop.

4. Buy What You Can Afford

Figuring out how much you can afford is the one of the first major steps in the homebuying process. To determine how much house you can afford, you should spend no more than 28 percent of your gross monthly income on housing expenses and no more than 36 percent on total debt -- that includes housing as well as things like student loans, car expenses, and credit card payments. The 28/36 percent rule is the tried-and-true home affordability rule that establishes a baseline for what you can afford to pay every month. 

5. Go Green

Replace your light bulbs with CFLs and LEDs – each bulb replaced adds up to at least $15-20 in energy savings over the lifetime of the bulb. Install a programmable thermostat to replace your current one, then program it to have heating and cooling shuts off when you’re not at home, saving you the cost of running it.