Buying a home is likely to be the biggest purchase you’ll make in your lifetime. Like most, you’ve probably waited a long time for this day to come. Undoubtedly, you’ve thought about the many features you’d like to have in your new home. Maybe it’s a beautiful kitchen you’re craving or perhaps a spa style master suite.
While its natural for home shoppers to have specific request for amenities, those same amenities can also decimate the budget. Home buyers who create a plan for their long-term financial goals and assess their current budget, can get a home they love without experiencing buyer’s remorse.
Home Buying Budgeting Tips
1. Know Your Maximum Price and Your “Must Haves” List
When you get pre-approved from the mortgage company, the lender will determine how much they think you can afford. This doesn’t mean you need to spend that much. Look at your budget before you even speak with the lender. Being able to communicate the maximum mortgage payment that you’re comfortable with will enable the lender to give you a price range that won’t leave you house poor each month. Just make sure the payment the mortgage lender is quoting you includes property taxes, insurances, and any homeowners’ dues that may be applicable. Once you know your price range, prioritize your list of “wants.”Knowing the difference between the amenities you want and the amenities you must have will put you in a better position to not overspend when you start looking at houses.
2. Don’t try to Keep Up with the Jones’
The Jones’ aren’t the ones making your mortgage payment, you are. They aren’t the ones who will be lying awake at night if the budget is too tight. Comparing yourself to others can turn into a nasty cycle that ultimately leaves you in despair. Overspending on a home can be a difficult mistake to recover from and is avoidable. Instead of obsessing over the amenities that your BFF has in her house, focus on how you’ll benefit from staying within your budget. Things like taking an annual vacation, putting more money in your retirement account or saving for your children’s college may mean more in the long run than having that beautiful outdoor kitchen.
3. Avoid a Bidding War
Imagine… You find the perfect house; you write a reasonable offer…and then your real estate broker calls to tell you that there are now multiple offers on the home. Competing with other buyers is never fun, and to win the house, you will probably have to increase your offer amount. This isn’t always bad, if you keep to your budget. Know how much you are willing to pay for a home in advance and resist the urge to go over your budget. Be willing to walk away if the price exceeds your comfort level.
4. Seek Out Homes That Aren’t Selling
Many buyers steer clear of homes that have been on the market for a long time, assuming there’s some sort of costly structural issue. Many times, a home’s inability to sell is based on something far simpler. For instance, maybe the home just has bad curb appeal and needs some TLC. Because these types of homes often have more room for negotiations, its good to seek out these homes. Even if the seller isn’t willing to drop the price, you may gain other benefits such as new flooring or fresh paint. Its always good to get a home inspection on every home, but especially important on a home that appears to have deferred maintenance. The home inspection can reveal issues with the plumbing, the roof, electrical and appliances, you can ask the seller to make the needed repairs or you can take your offer off the table.
Staying within your budget takes a little research, planning and discipline. No one other than YOU will be making your mortgage payment so it’s important that YOU are comfortable with the numbers before getting caught up in the excitement of house hunting. Your Employee Home Ownership Program can help you determine the price range that fits comfortably within your budget so you can avoid the problems associated with overspending. Reach out today for more information.