One of the biggest mistakes that homebuyers make involves hunting for a home they can’t afford. While it’s true that a bigger, more expensive, more beautiful and better-located home could be more enjoyable for your family, it’s vital to reign in your enthusiasm to prevent going outside of your budget and falling into financial problems later down the road.
To prevent buying a home that’s too expensive, the first thing you should do before shopping is to codify your budget. What can you and your family realistically afford to spend in terms of a down payment and monthly mortgage payment obligations? Write down all of your monthly expenses and compare it to your income to ascertain how much you can reasonably spend on your new real estate purchase. When creating your budget, remember to account for large annual expenses like taxes, insurance premiums and yearly vacations.
Searching online for a “mortgage calculator” can help you predict with more accuracy what you and your family can afford in the context of current home mortgage interest rates. Once you know what your monthly mortgage payments will be, you can compare that to your budget.
Finally, take care not to visit or peruse homes that are outside your budget, as this will only tempt you to make the dangerous leap into deeper financial waters than your wallet can handle. One way to ensure you’re on the right track in terms of budgeting for a new home is to consult with an experienced real estate attorney before you start to negotiate a new home purchase.