Build a Monthly Budget Before You Buy

A pre-approval tells you what a lender is willing to lend. A budget tells you what you're comfortable paying. They're not the same number, and the second one is the one you live with every month.

Six steps

• 1
  Start with what comes in. Your take-home pay and any other regular income. If it varies, from commissions, tips or gig work, estimate low.
• 2
  List what goes out. Fixed costs like rent, car payments, insurance and phone, then the ones that move: groceries, gas, eating out, subscriptions. Guess high on those.
• 3
  Include what you already save. Retirement, savings, anything you put away each month.
• 4
  Compare the two. More coming in than going out? Put the difference toward your down payment and your cushion. The other way around? Look for what you can trim.
• 5
  Build a cushion. Three to six months of living expenses in savings, on top of what you're saving for the home.
• 6
  Track it. Check real spending against the plan every month or two, and adjust. That habit is what makes a budget work.