Find a house that fits your finances
A mortgage calculator can give you a useful number at the beginning, but it’s only part of the picture you’ll need to decide what fits in your price range. In achieving the happy homeownership dream, look at all the aspects of the purchase that affect cost over time. Actually, buying a home on a budget is easier than you think.
Analyze added costs
In his e-book, “First Time Home Buying 101,” Shashank Shekhar of the Lending Expert Blog points out that property taxes, homeowner’s insurance, mortgage insurance and homeowners association fees are sometimes overlooked. All should be considered when projecting the total amount of money a new home is going to cost you each month. Thinking realistically about added costs could save you hassle and potential heartbreak when it’s time to start checking out listings.
Go with a pro
A real estate professional can help you avoid pitfalls on the road to homeownership. Because the cost and size of homes vary by neighborhood, it may be advantageous to find an agent who specializes in a specific area. “This can be a real plus, since the agent will probably be well versed in the homes, schools, municipal services and other important information,” Shekhar writes.
Saving is knowing
Financial adviser and television host Suze Orman has a suggestion for would-be home buyers: Try out the payment plan. Subtract your current monthly rent or mortgage payment from the amount you expect to pay for your new home, then put the difference into savings. If you can keep it up for six months, it will show that you can afford the new home — plus you’ll have a decent chunk of change to put toward your down payment.
Act like an O.W.N.E.R.
The U.S. Department of Housing and Urban Development uses an acronym to outline the key steps in preparing for home ownership:
- Watch spending and savings
- Elevate your credit score
- Read (and understand) the fine print.
According to HUD, “What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate.”
Prepare for property taxes
Local property appraisers often have tax information available online. Search your desired location to get a sense of how property taxes should figure into your plans, keeping in mind that it’s going to differ by municipality.
Matters of maintenance
From roof to foundation and everything in between, repairing a home can come with a big price tag. To avoid being blindsided by the costs, budget for home maintenance. As for the amount homeowners will pay for maintenance each year, U.S. News & World Report places the total at around 1 to 4 percent of a home’s value.
Closing the deal
Having a plan to handle closing costs, including making an arrangement with the seller, can alleviate some stress during the final phase of the purchase. Several websites offer closing cost calculators that generate a ballpark estimate of how much it could set you back.
Some level of calculated risk is involved in any home purchase, but that doesn’t mean prospective buyers can’t prep for the move like an expert. Know the numbers, do the research and don’t hesitate to seek out for professional help.