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Bottom Line Up Front

  • Your mortgage payment generally includes 4 things: principal, interest, taxes and insurance.
  • Creating a monthly budget builds strong financial habits and can help you determine how much mortgage you can afford.
  • Consider other expenses like maintenance, unexpected repairs and rate fluctuations when building your home-buying budget.

Time to Read

6 minutes

July 26, 2022

In the market for your first house? Congratulations—it’s such an exciting milestone! 

You’ve probably done some research on what it takes to buy a house and how to ensure a smooth mortgage experience.  You may even have saved money to cover a down payment and closing costs. 

But closing isn’t the finish line. You’ll still have a few other costs to cover like maintenance, repairs or homeowner association (HOA) fees. So, how do you manage your housing budget like it’s a marathon and not a sprint? We’ve got some tips that may help.

Understand Your Monthly Mortgage Payment

Understanding what makes up a mortgage payment is an essential way to make sure you buy a home you can afford, not just one you can get approved for. We get it—it’s easy to think that your monthly mortgage payment will be the price you agreed to pay divided by the number of months you’ll be paying on your loan. However, that’s not how it works. In fact, your monthly mortgage payment will likely be made up of 4 things:

  • Principal: This amount goes directly toward your loan balance.
  • Interest: In the early life of your mortgage, a large chunk of your monthly payment will go toward interest. Over time, that amount will decrease and the amount that goes toward your principal will rise.  
  • Taxes: Your property’s location and value will determine how much you’ll pay in taxes.
  • Insurance: Most lenders will require you to have homeowners insurance to cover potential damage or theft costs. If your down payment is less than 20%, you may also be required to pay for private mortgage insurance (PMI). 

Your monthly payment could change somewhat over time, due to changing tax and insurance rates. If you choose an adjustable-rate mortgage, you can expect your interest payment to change according to the latest market rate index.

See what special member savings you could get when you secure homeowners insurance from Liberty Mutual, made available to Navy Federal members through the TruStage™ Auto & Home Insurance Program.1 2

Review Your Current Budget

Believe it or not, creating and sticking to a budget is a great way to boost your financial skills. Don’t have a monthly budget yet? Here’s how to build one:

  1. What’s your income? This includes not just your paychecks, but also any bonuses, interest or dividend payments made to you from investments, alimony or child support.
  2. What do you have to pay each month? Add up your regular monthly expenses. Be sure to include items like:
    • food, clothing and transportation costs
    • utilities (e.g., gas, electric, water)
    • debts (e.g., credit cards, car payments, student loans)
    • insurances (e.g., life, health, auto) 
    • internet and cable
    • subscriptions and memberships (e.g., video streaming services, gym)
    • savings contributions
  3. What’s left after you subtract your expenses from your income? Subtracting your expenses from your income tells you how much you can spend for housing. Many financial experts recommend spending no more than 28% of your income on a mortgage and general housing expenses, like the ones we explained above.

If your budget has more than enough to cover your estimated monthly housing costs (you can get a rough idea of your monthly payments here), then you’re good to go! But, if not, there may be steps you can take to help you get there—like looking for expenses you could reduce or cut out or devising a plan to increase your income. If you’re not sure how to set up your budget, you can use our interactive Monthly Budget Worksheet as a starting point. 

Create a Sustainable Budget for Homeownership

Try these tips to stretch your budget farther:

  • Don’t be too rigid. Almost everybody wants that perfect house with the short commute, nice neighborhood and lots of space. If you want to have a home you can afford, be willing to make a few compromises. 
  • Estimate future costs. Having a basic outline of when you might need to repair or replace things in your home can help you prepare. For example, a roof usually lasts 20 to 30 years and carpets and appliances are usually good for about 8 to 10 years. When you begin house-hunting, make sure your realtor will answer questions like that about potential properties. 
  • Create a special savings fund for upkeep. Pricey repairs and maintenance costs don’t come up every month. But you’ll be really glad you put money aside each month in a separate savings account when they do hit. It’s a great feeling, knowing you can handle whatever comes up and won’t have to scramble around at the last minute to find a way to pay for them.
  • Reduce unnecessary expenses. Shift money from discretionary (optional) expenses to housing expenses. You can free up funds by making a few simple changes. For example, instead of paying for a gym membership, could you work out at home or outside? When you aren’t using electronics, could they be turned off and unplugged? If you need some furniture or clothes, do you try the secondhand route before buying new? Could you choose a less expensive internet, cable or streaming service? Can you ask for discounts from various service providers?

Going the Extra Mile for You

Your mortgage partner should support you throughout the years. At Navy Federal Credit Union, we offer: 

  • VA loan expertise
  • rate-locked mortgages
  • several loan options that don’t require PMI 
  • best-in-class service throughout the life of your loan

Plus, our low rates and flexible terms may also help members who already have a mortgage lower their monthly payment. Explore all that our mortgages have to offer.

Next Steps Next Steps

  1. If you’re looking to buy a home, take some time to research what your estimated costs would be for where you want to live. Use our mortgage calculators to help. 
  2. Next, budget out your monthly expenses and see how much you’re able to set aside for your home-buying expenses. 
  3. Put that money into an account that grows over time, like a certificate or a high-yield savings account. Make sure you understand the terms of whichever account you choose so that you select one that allows you to access the funds in an emergency. 



Liberty Mutual Insurance is made available to Navy Federal Credit Union members through TruStage™. Auto and Home Insurance Products are issued by Liberty Mutual Insurance Company or its subsidiaries or affiliates, 175 Berkeley Street, Boston, MA 02116 USA. © 2023 Liberty Mutual Insurance. In Texas, coverage provided and underwritten by Liberty County Mutual Insurance Company, 7900 Windrose Avenue, Plano, TX 75024. All statements made are subject to provisions, exclusions, conditions, and limitations of the applicable insurance policy. Coverages and features not available in all states. Discounts are not available in all states and discounts vary by state. Certain discounts apply to specific coverages only. To the extent permitted by law, applicants are individually underwritten; not all applicants may qualify. A consumer report from a consumer reporting agency and/or motor vehicle report will be obtained on all drivers listed on your policy where state laws and regulations allow. Please consult your policy for specific coverages and limitations. The insurance offered is not a deposit, and is not federally insured, sold or guaranteed by Navy Federal Credit Union. Navy Federal Credit Union is in no way responsible for any products or services provided by or through TruStage , Liberty Mutual or their affiliates, subsidiaries, and insurance company partners. Navy Federal Credit Union enables this insurance program to be offered and is entitled to compensation from TruStage Insurance Agency, LLC. © TruStage AUT-6031024.1-1023-1125


Discounts and savings are not available in all states, and discounts vary by state. Certain discounts apply to specific coverages only. To the extent permitted by law, applicants are individually underwritten; not all applicants may qualify.

This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.