Whether you are buying your very first home or your forever home, buying a home is probably the biggest purchase you will ever make. Because of this, I’m sure you have several questions on your mind.
One of your top questions is probably regarding the budget for the home you want to buy. No matter how much money you make, everyone needs a budget. You can’t afford everything, so you need a plan.
Here are different things you should think about if you want to buy a home:
Be realistic.
Whatever you do, you always need to be realistic with your home purchase. For example, if you make $50,000 a year, then looking at $5,000,000 homes and having your heart set on buying it within the next few months is probably not very realistic.
This then leads to the next tip…
Set a budget.
The saying is that you should not spend more than 28% of your monthly income on your monthly mortgage payment. This can fluctuate though. For me, I would prefer to be much lower than that.
I would prefer to be somewhere near 10% to 15% of my monthly income so that if something were to happen such as a bad income month or a large unexpected expense, then we wouldn’t be as affected by it.
You should create a budget that you are comfortable with.
Don’t go over your budget.
Once you set a budget, you should try your best to not go over it. You set a budget for a reason after all!
There are also many other expenses that you need to think about if you increase your budget.
You may have to pay higher taxes, higher home insurance, you might need more furniture, and you may have higher utility bills. Oh yeah, and don’t forget about the additional amount you will be paying in interest each moth!
Get pre-approved.
You should get pre-approved once you believe you are ready to buy. You should also do this BEFORE you start searching for your home. You never know if you might not get pre-approved for the amount that you think you will get approved for. This might not be good if you already started searching for a home because you might fall in love with a home that you are not approved for.
Also, you should create a budget separate from what the bank approves you for. Bank’s are known for approving potential homeowners for much more than what they can actually afford.
How did you decide how much you would spend on your home?
Image via Flickr by fr0ggy33
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