Above all else, buying a home is a huge financial decision. You might raring to go and to get the ball rolling, but until you have a keen grasp of the money you need to finalize a deal, you’re putting the cart before the horse.
Let’s slow things down and crunch the numbers first. Not only will it stop you from wasting time on homes you can’t afford, but it allows you to significantly speed up the process once you want to make a decision.
How much house can you afford?
Unless you’ve got a fat load of cash sitting aside, the chances are that you’re going to be paying for the home over a long time through a mortgage. Before you start even looking in the direction of better deals, you need to figure how much house you can afford from month to month. This means making a full map of your cash flow with all incomings and outgoings. If you have an idea of an area you want to live in, it’s a good to look at expected daily costs, including utilities, groceries, and any commutes. Boiling down all your expenses should give you a good idea how much cash you have left from month to month. That’s that absolute maximum you can afford to pay for a home, but you should leave a little breathing room so you have money to save and put towards emergencies while paying for the home.
Budget for everything, not just the buy
You’re still going to need to pay a lot of money up front during the house buying process, too. You need a down payment and perhaps a good faith escrow payment to secure the home. But you also need to consider extra expenses like conveyancing, moving companies, initial insurance payments and the like. You can’t fail to budget for any of the costs, so find which are applicable for your state.
Getting the money
Then, of course, it comes down to actually getting the money you need. Once you’ve figured how much home you can afford, including expected insurance payments, it’s about finding a mortgage. Don’t just jump at the first one that comes your way, however. Compare to ensure you’re not overpaying, including the key details of how much the house is and how much you want to take in the mortgage within that. Be wary of using middlemen services in finding things like mortgages, as well. Sometimes, they get a higher rate for choosing a bank that might not exactly provide you with the best deal.
Get a little help
It’s not all about how much you spend, either. Sometimes, you might be able to gain a little depending on your circumstances, too. Depending on your state and other qualifying factors, first-time home owners can get grants that help them manage the down payment entirely. Some of these grants can even be forgiven prematurely if you’re able to pay stably over a set number of years. Get a look in your area to see which grants are available if you’re a first-time homebuyer.
With the tips above, you should be ready to start looking at homes with a real eye to buy without any nasty financial surprises down the line. Happy hunting.
This is a collaborated post.