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---
layout: default
title: Preparing for a settelement step 3
---
<div class="row">
<div class="small-12 columns "><h1 class="main-header-stages">STEP 3: Complete Your Budget </h1></div>
</div>
<div class="row">
<div class="small-12 columns">
<p >The budget in this guide is only for your use.
No one else is going to see it unless you show
it to them. It is designed to help you make an
honest assessment if you can afford to keep
your home. This is also good preparation for
meeting with your housing counselor and
filling out your Bank’s financial forms.
</p>
</div>
</div>
<div class="row">
<div class="small-12 columns "><h2 class="main-header-stages"></h2></div>
</div>
<div class="row">
<div class="small-12 columns">
<dl class="accordion" data-accordion>
<dd class="accordian-stages">
<a href="#panel1"><h2>Monthly Income</h2></a>
<div id="panel1" class="content">
<div class="row">
<div class="small-12 columns">
<ul>
<li><p>First, you need to compute your total monthly
income. Listed below are the most common
sources of income. You want to list all of your
personal sources of income (Column A), as
well as any other income from anyone else in
your house if they are helping contribute to
the mortgage (Column B)
<a href="#" data-reveal-id="firstModal" class="button tiny">Household income</a>
<div id="firstModal" class="reveal-modal" data-reveal>
<a class="close-reveal-modal">×</a>
<img src="img/income-calculator.png" alt="settlement Conference">
</div>
</p></li>
<li><div class="stages-emphasis-warning-assurance">
Please remember that you MUST be able to
verify all the sources of income you use in the
budget.</div></li>
<li>Your Bank will not consider sources
of income without accompanying verification.</li>
<li>If you are using another household member’s
income in your budget, count that person’s
expenses as well and make sure you have
verification of their income.</li>
</ul>
</div>
</div>
</div>
</dd>
<br class="clear">
<dd class="accordian-stages">
<a href="#panel2"><h2>Gross Household Income</h2></a>
<div id="panel2" class="content">
<div class="row">
<div class="small-12 columns">
<ol>
<li><p>Adding
columns A and B gives you your “Total Gross
Household Income.” This amount is $_______.
Multiply this number by .31. This equals
$_________, and we will refer to this as your
“31% Payment”. Most of the large banks in
the country have recently settled on 31% as
being one of the main standards they use
in determining if a payment is affordable –
anything above 31% is often looked at as
being too high. Therefore, your 31% Payment
is an approximate amount you should expect to pay in total for your first mortgage,
homeowners insurance, property taxes and
condo fees/homeowners association fees.
Remember, there is no law that says you
cannot pay more than 31% -- this is merely
meant as a guide to give you a better idea
of what many of the national banks have
recently done. In addition, if you were
paying less than this before you defaulted,
be prepared for your mortgage payment to
increase to this amount each month.</p></li>
</ol>
<a href="#" data-reveal-id="firstModal" class="button tiny">Gross Household Income</a>
<div id="firstModal" class="reveal-modal" data-reveal>
<a class="close-reveal-modal">×</a>
<img src="img/income-calculator.png" alt="settlement Conference">
</div>
</div>
</div>
</div>
</dd>
<br class="clear">
<dd class="accordian-stages">
<a href="#panel3"><h2>Net Household Income</h2></a>
<div id="panel3" class="content">
<div class="row">
<div class="small-12 columns">
<ol>
<li>Adding columns C
and D gives you your “Total Household Net
Income.” This amount is $_______. This is
how much you actually receive each month,
and the amount available to pay your bills.
</li>
<li><h2>MONTHLY EXPENSES</h2>
<p> Now that we have looked at your income,
we need to compute your total monthly
expenses. Included on the next page (page
20) is a list of typical household expenses you
may have each month. Fill in each category
as best you can. We realize that it often can
be diffi cult to estimate certain categories,
such as how much you spend on food each
month. However, it is vital for you to fill this
out as accurately as possible. The only way
to make an accurate determination if you can
aff ord your home is to look at what else you
are spending your money on. You will likely
have to fi ll out a very similar form for your
Bank, so working on your budget now will
help you.
</p>
</li>
<li>Now take each of the subtotals from your
expense list and copy them in below.
<p>Next you need to calculate how much money
you have after you pay all your bills, or how
much more you are spending each month
than you are earning. Take your Total Net
Income, which you calculated earlier, and
subtract your Total Monthly Expenses, which
you just calculated.
</p>
</li>
<ol>
<li>Total Net Income $____________</li>
<li>Total Monthly Expenses $____________</li>
<li>MONTHLY SURPLUS/DEFICIT $____________</li>
</ol>
<li>If this amount is negative, it is referred to
as your “monthly deficit”. If this amount is
positive, it is referred to as your “monthly
surplus”. If you have a monthly deficit, do
you see any sources of income that you can
increase, or any expenses you may be able
to cut back on? In addition, look at the 31%
Payment we calculated earlier. If we plugged
the 31% Payment amount into your budget
in place of the current Monthly Mortgage
Payment, would that be enough to turn your
monthly deficit into a monthly surplus? If not,
you may not be able to afford your home and you should seriously consider other options
(such as a “short sale” or a “deed-in-lieu of
foreclosure”).</li>
</ol>
<a href="#" data-reveal-id="thirdModal" class="button tiny">Monthly Income</a>
<div id="thirdModal" class="reveal-modal" data-reveal>
<a class="close-reveal-modal">×</a>
<img src="img/monthlyIncome.png" alt="monthly income">
</div>
<a href="#" data-reveal-id="firstModal" class="button tiny">Monthly expenses</a>
<div id="thirdModal" class="reveal-modal" data-reveal>
<a class="close-reveal-modal">×</a>
<img src="img/monthlyTotals.png" alt="monthly income">
</div>
</div>
</div>
</div>
</dd>
<br class="clear">
<dd class="accordian-stages">
<a href="#panel3"><h2>Additional Resources</h2></a>
<div id="panel3" class="content">
<a href="SettlementConference.html" class="button">Settlement Conference</a>
<a href="Forms.html" class="button">Forms Guide</a>
<a href="terms.html" class="button">Glossary</a>
</div>
</dd>
</dl>
<div class="row">
<div class="small-12 small-centered columns">
<ul class="pagination stages-navigation">
<li class="arrow"><a href="preparing-for-settlement-steps1-2.html">«</a></li>
<li ><a href="SettlementConference.html">Settlement</a></li>
<li ><a href="preparing-for-settlement-steps1-2.html">Settlement Steps 1-2</a></li>
<li class="current"> <a href="preparing-for-settlement-step3.html">Settlement Step 3</a></li>
<li ><a href="preparing-for-settlement-step4-5.html">Settlement Steps 4-5</a></li>
<li ><a href="Stage7.html">7 & 8</a></li>
<li class="unavailable"><a href="">…</a></li>
<li class="arrow"><a href="preparing-for-settlement-step4-5.html">»</a></li>
</ul>
</div>
</div>
</div>
</div>
<div class="row">
<div class="small-12 small-centered columns">
<ul class="pagination stages-navigation">
<li ><a href="SettlementConference.html">Settlement Conference</a></li>
<li ><a href="preparing-for-settlement-steps1-2.html">Steps 1-2</a></li>
<li class ="current"> <a href="preparing-for-settlement-step3.html">Step 3</a></li>
<li> <a href="preparing-for-settlement-step4-5.html">Steps 4-5</a></li>
</ul>
</div>
</div>
</div>