Financial Considerations When Buying a Home
One thing a lot of prospective home buyers tend to forget is that there will be additional expenses on top of their monthly payment. We’re not talking about the usual cost-of-living expenses like groceries, gas, and utilities, we’re talking about things like homeowner’s insurance, property taxes, maintenance and repairs. If you buy a condo, you’ll be paying fees to the Homeowner’s Association. So when buying your new home, make sure you do your homework and consider all the expenses you’re going to have after you close the deal. This will give you a better idea of exactly what you can afford.
Pinpoint The Amount You Want Your Mortgage To Be
On that topic, knowing exactly what you can afford is absolutely crucial when buying a home. What you know you can afford or are comfortable paying might not necessarily be the same as what the bank says you can afford. Make a thorough list of all your monthly expenses (minus rent, of course), taking care to remember major expenses that might only occur annually, like insurance premiums, and subtract that from your take-home pay. This will tell you exactly how much you can afford to spend on monthly house payments. Do NOT look at houses outside of this price range, as this can lead to you falling in love with a house you can’t afford and making the catastrophic mistake of trying to stretch beyond your means, which will cripple you in the long run.
Get Pre-Approved Before You Make An Offer
Make sure you get pre-approved for a loan before you even think about placing an offer on a house. What you think you can afford and what the bank is willing to lend you may not always be the same number, especially if your income isn’t stable or you have poor credit. Also, once you get pre-approved, keep your credit stable. Your loan can still fall through if you do something that might alter your credit rating, like financing a car. If this happens, you’ll be out the thousands of dollars you put up when you went into escrow.
