Let’s face it, homes are expensive. It costs a lot to have a place to buy a house, and that is one expense that isn’t going away anytime soon. We all need to have a place to keep our stuff and sleep at night, and having our own roof to do it under is certainly a blessing.
But have you considered exactly how expensive it is, and what it takes to buy a home? Let’s take a look…
Buying a House Can Be Expensive
Avoid Extra Costs
A home is probably the single most expensive item that you will buy in your lifetime. So it makes sense to do a lot of research before committing to that home mortgage.
The home you pick out may or may not fit with my own tastes, so there isn’t much I can help you with on that part of finding a home. But I can help with factors that affect costs and affordability.
One thing you should consider is how much you can put down on a new home at the time of purchase. If you can’t afford to plunk down 20% or more as you sign on the dotted line, then you will probably have to pay for Private Mortgage Insurance (PMI.)
This will cost you somewhere in the neighborhood of 0.5% to 1% annually on top of the mortgage itself. For a $100,000 home, this will cost an additional $84 a month.
You can avoid this extra cost over the life of the loan by saving up a good down payment before buying that dream home.
Having the money to invest in your home up front not only saves you fees over the course of the loan, but it also gives you buying power and confidence as you shop around.
Prepare for the Payment
One of the best things you can do before taking on a home mortgage is to do a little spring cleaning with any payments you already have. Lenders look at how much you are out on a monthly basis when processing your loan application.
You can help this part of the process by eliminating as many smaller monthly responsibilities as you can before applying.
Getting rid of smaller debts will also help you to better manage a new mortgage payment. You will find that a new home has many costs associated with it that you may not expect, and having some discretionary funds will be very handy when an unexpected home repair pops up.
One of the best things you can do to prepare for buying a new home is to get a handle on your monthly spending. If that seems difficult or challenging, you should consider putting off a home purchase until it is under control.
Use a Calculator
Fortunately, there are many online calculators that directly address the question of how much house can I afford? By using these powerful tools, you can get a good understanding of your own financial situation.
Many of these calculators allow you to plug in numbers and play with them to see how changes impact your options.
I suggest using an online calculator as an exploration tool and change the numbers around to see what works best for you. You may be surprised how a bigger downpayment or elimination of debt can impact the amount of house you can afford.
As I said before, buying a house is probably one of the most significant purchases you will make in your lifetime. For this reason, be sure to take your time and do plenty of research before jumping into a mortgage.
If you are in the market for a new home, the best time to start saving for a down payment and eliminating smaller debt is right now. Done right, home ownership will continue to be a wonderful thing for you and your family many years from now. You just need to do the groundwork first.
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