Buying a home requires a careful analysis of your future financial and personal goals so you can enjoy home ownership, not stress over it. Part of knowing how much you can afford takes into account both current expenses and future expenses (and expenses that you don’t know you will have down the road.) Mortgage payments need to be able to flex to accommodate the unknown and the known. The following tips can help you to estimate the amount of mortgage you can afford.
When you’re preparing to buy a home, it’s important you dive into your finances to explore what room you have in your budget. Merriam-Webster defines a budget as the amount of money that is available for, required for, or assigned to a particular purpose. Budgeting is important because lets you know where your finances currently stand. However, it also tells you room available in your budget to add things in, like a mortgage. When looking at what you’ll be able to afford, we will have to examine several factors, like: your household income, monthly debts (car loans, student debt), and where your savings for a down payment currently stand.
It’s important to truly understand your budget and have a comfort in knowing what exactly you’ll be able to contribute to a monthly mortgage payment. Buying a home is exciting, but you will need to set realistic expectations so you don’t get into a mortgage you can’t handle.
A down payment on a home essentially is the money that a homebuyer gives to the seller to secure the purchase of the home. Your down payment affects the type of home loan you can get, along with what your interest rate and home costs will be. Here are some quick facts from Consumer Finance about down payments.
If your down payment isn’t quite what you want it, you have options. To save up fast, try cutting expenses in your budget. This would include doing things like no frequent eating out, no shopping, no cable, and cancelling your gym membership for the time being. These small changes can add up fast with hard work and commitment. You’ll see the dollars racking up before too long! Other tips include pressing pause on your retirement savings, picking up more work, and finding more ways to save money in between the lines.
When buying a home, you’ll need to look at all of your debts. Basically, this is looking at your credit history and seeing:
By definition, debt is brought on when someone owes another person or company money. To break that down, it’s when you get something of value and pay for it in coming months or years. After reviewing, you might decide you need to wait for a mortgage. This could be a smart financial decision until you can pay off some more or most of your debts. You have options to get out of your debts. According to Millennial Money, they suggest these steps to get out of debt fast:
Debt might seem impossible to get out of, but by being strict with your budget and paying your debts off in a timely manner you’ll be able to get out of debt faster and save more money in the long run. This will be beneficial to your down payment and your future, particularly since it will help you save more money on your home in the bigger picture.
Rent is defined as a tenant’s regular payment to a landlord for the use of property or land. If you currently rent a home or an apartment ,and find yourself not able to keep up with your rent very easily, you should use that as an example for what mortgage you can afford. Look for a home that will provide the same payment as what your rent. If you jump into a more expensive home, you’re setting yourself up for failure. Due to this, you won’t know how to get the money to pay your bill off each month. An important thing to remember is that you’ll now have new costs with a home that you haven’t had to cover before. These costs include home maintenance, property taxes, and more. If you don’t have enough money to afford these items easily, you’ll become financially stressed soon.
An important step in the home buying process is seeing how much home you can afford. Our calculator can help provide an idea of what price range you could be looking at in your next home. People rarely have enough money to buy a home in cash. This is why mortgage loans exist. Lending Studios is here to help get you into your dream home! We know that getting you into your perfect home is important, and we know just how special this time in your life is.
Buying your home is exciting because you will now own the home you live in! However, you have to calculate your affordability and know you can keep up with your payments before committing to something like this.
Pros to buying your home:
To summarize, if you’re looking at taking out a mortgage you should look at your bank accounts. You should never buy a home that costs more than what your income can afford. We will look at mortgage payments, property taxes, home insurance, and monthly living fees. By doing this, we will help you calculate your home affordability.
Understanding your affordability when buying your first home will help you keep up with your payments in the long run. Looking over your current and potential future finances will help give you an idea of just how much you will be able to afford.