In this hot housing market, it can be easy to blow your budget.

That’s why you have to have a clear plan in place before you start looking for your next home, experts say.

“If you don’t go in with a clear budget in terms of what it is you can comfortably spend, you get attached — especially if you find a house that speaks to you,” said Philadelphia-based certified financial planner Jocelyn Wright, managing partner at PF Wealth Management Group.

“We have to be willing to walk away.”

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Competition is tough due to low inventory of housing on the market. That means there are often bidding wars, driving up house prices. In March, prices were 13.2% higher than the same month a year before — the largest gain since December 2005, according to the S&P CoreLogic Case-Shiller National Home Price Index.

Many pandemic buyers responded by ditching their plans. Thirty-nine percent went over their original budget for their new home this past year, according to a recent Realtor.com survey.

Yet getting caught up in the competition could have a dire impact on your finances.

“If they are not being thoughtful about how buying a home impacts a lot of different areas of their life, they can get themselves into hot water quickly,” said Lexi Holbert, housing and lifestyle expert for Realtor.com.

Here’s how to make sure you don’t overspend in this competitive market.

Just because a bank tells you that you can get a mortgage for a certain amount doesn’t mean that is the budget for your new home.

Instead, come up with your number after carefully reviewing your finances — before you start looking at houses.

Your housing budget should include not just what you are paying in monthly mortgage principal and interest, but also overall housing expenses such as property taxes, insurance, maintenance and possibly homeowner association fees.

Ideally, you want those total expenses to land between 25% to 35% of your income, Wright advises.

“Know what your parameters are so you don’t get caught up and wind up buying more house than you comfortably afford,” she said.

In addition to your down payment, have an emergency fund in place for any unexpected expenses.

Even if you don’t have the generally suggested three to six months in expenses saved, make sure you have something established before you buy a home, Wright said.

Some of your bills, such as heat and hot water, may go up if you have moved from a rental or a smaller home. You may have to pay for landscaping and lawn care.

There will be other costs associated with getting into the home such as moving expenses, furniture or potential upgrades or renovations. Be realistic about those costs.

Nearly half, or 48%, of those recently surveyed by Ally Home said they wish they had been more prepared for the cost of home repairs.

Once you have a budget, only look at homes that fit into it — or come in under it, Holbert suggests.

“Most likely the houses you are looking at will go above listing price,” she said.

“If you look at homes a little lower than your budget, it will give you flexibility to make competitive offers.”

In choosing a lender, look at what the costs will be, including fees and any points that will be charged, Wright suggests.

You can also see if you qualify for any incentives that can bring down the cost of your mortgage, like assistance for first-time homebuyers. Also, check with your employer in case they offer any help.

While interest rates have been near historic lows, they fluctuate up and down. That means they can rise in between the time you get your mortgage pre-approval and the time you close. Even a small move higher in rates will mean a larger monthly payment.

Freddie Mac updates interest rates on Thursdays, Holbert said. Keep an eye on them and if you see a couple weeks of changes, go back to your lender.

“You can ask them to pull your interest rate and calculate the mortgage payment one more time,” she said.

At the end of the day, it’s important that you don’t overspend and end up in a tight spot.

“The one thing we want to avoid is being house poor,” Wright said.

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