Buying a home is one of the biggest financial decisions of your life. The decisions you make upfront will affect you and your finances for many years to come. In other words, it’s not a good time to make a bad decision.
One of the first things you should do is determine how much you can comfortably afford to pay each month for your mortgage. There are two ways of doing this:
- A careful review of your budget: This will give you a clear idea of how your mortgage payment will fit in, based on your current income and expenses.
- A mortgage pre-approval: Obtain a prea-pproval from a mortgage lender. This helps you understand how much of a home you can afford, which allows you to calculate your monthly payment.
The problem with a mortgage pre-approval is that your lender may qualify you for more money than you want to spend. That’s okay, as long as you make your final decision based on what you’re comfortable spending.
There’s More than the Cost of the Home
From a financial perspective, there’s more to buying a home than the sales price. This may be your biggest expense, but others come into play. These include but are not limited to:
- Home insurance
- HOA dues
- Ongoing maintenance
Some of these things, such as taxes and home insurance, will increase your monthly mortgage payment. Others, such as ongoing maintenance, pop up every now and again.
Once you know how much you can afford, you can then search for a home accordingly. By taking into consideration every last expense, it’s easier to make a confident purchase.
If you’re confused as to what you should do next, don’t hesitate to seek help while buying a home. In addition to your real estate agent, you can consult with a loan officer, mortgage broker, financial player, and/or tax professional.
With professional help on your side, you’re more likely to look at your purchase from every financial angle. And when you do that, you improve the likelihood of buying a home that fits nicely into your budget.
Don’t make the mistake of biting off more than you can chew. Run the numbers, review them, and get all the help you need. This will help you avoid a situation in which you realize you spent more than you can afford.
Do you own a home? How did you calculate how much of a mortgage you can afford?