Buying a house is something that most people look forward to. A home can be a great investment and can provide you with security. However, it is important that before you purchase a home that you are clear about what home ownership entails. If you are not careful you can easily drain all of your money into your home and be strapped financially, essentially becoming house poor. Luckily, there are a couple things that you can to do avoid this problem. Here are some suggestions.
1. Buy at Your Current Budget, not Your Expected Budget
If you are in a promising career you may be tempted to buy a house assuming that things will get better. Of course everyone always hopes for the best, but to be safe you should prepare for the worst. Even if you think that a promotion is in the near future, or you are on the brink of something big, you should never buy a house expecting it. To calculate how much you can afford in a home you should use only the income you have now. Then if things get better, great! If not, you are not in trouble.
2. You Decide What You Can Afford, Not The Bank
As a general rule a mortgage lender will lend up to 43% of your income so that your debt to income does not exceed this number. This means that you may become qualified for more home than you thought you could. However, just because you get qualified for a bigger number doesn't mean that you should spend that.
Instead, go over your budget before hand and decide how much you want to put into your house each month. You should try to keep the numbers as realistic and reasonable as possible, knowing that there may be more expenses. Then when you get approved for the mortgage, you know how much you actually want to accept for your loan.
3. Don't Forget About The Extras
Being a homeowner is expensive. If you have only rented up to this point your landlord probably covered the majority of the extra expenses. For example, if the dishwasher broke, your landlord was responsible to replace it. When you own the home it is completely up to you. There will be extra expenses each month that you cannot always predict. In addition, you may still need to furnish the home, pay for mortgage insurance and much more. It is important to calculate these expenses before you purchase the house.
By doing these things you can be confident that you can afford the home. Talk to RE/MAX EXECUTIVES PLUS or your local real estate agents to learn more.