Buying a home is often the biggest financial investment consumers make in their lifetimes. If there’s one piece of advice to follow on the journey, it’s to avoid buying more house than you can afford.
Here are some tips for setting financial boundaries when buying a house.
Make a realistic budget
Writing out a budget is an exercise in honesty. It’s time to ‘fess up to those $10 lattes, the credit card debt you don’t like admitting to, and your shoe addiction. Include every expense in your budget. Otherwise, it won’t give you an accurate representation of what you can afford to spend on a home.
Look at what you pay in rent… but be prepared to spend more
Many homebuyers fall into the trap of thinking they can pay as much on a monthly mortgage payment as they can in rent. This is usually not the case, as homes require costly upkeep and maintenance. A good money move is to aim for a monthly payment that’s less than your rent. You can use the difference to pay for repairs that are 100% bound to happen eventually.
Use a payment calculator
Figure out how much you would be paying every month by using an online calculator. You can play around with different down payment amounts and interest to see how much you need to budget. If the payment is too high, you’ll need to either buy a less expensive house, put more money down, or find a lower interest rate.
*Hint: Do everything you can — like paying your bills on time and keeping your credit card balances low –to keep your credit as perfect as possible. Good credit scores can net you better interest rates, helping you save big every month.
Only look at homes that are in your price range
Once you’ve established your homebuying budget, don’t be tempted by higher-priced properties. Don’t even look at them. Stick to your guns and only shop within your budget.
If you’re having an issue staying in-budget, consider looking in less expensive neighborhoods or paring down your square footage requirements.
Plan on making a hefty down payment
Paying a good chunk down (20% of the home’s price) helps you fit it into your budget better. First, more down means less to finance, making mortgage payments lower. Second, a sizable down payment gets you out of private mortgage insurance (PMI), which can save a significant amount, too.
Consider down payment assistance programs and other ways to cover your down payment.
Buying a home is a great investment, but don’t bite off more than you can chew with your mortgage payments and home upkeep. Take a hard look at your budget, determine what you can pay, and stick closely to your budget. This plan will ensure you end up in a home you can afford and avoid buyer’s remorse.
Getting pre-qualified is the best way to get a clear picture of your monthly homebuying budget. Contact an MIG loan officer today to get started.
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- Source: https://migonline.com/blog/2023/07/05/the-power-of-a-homebuying-budget-why-setting-financial-boundaries-matter/
