Home ownership can seem like a daunting task, and trying to figure out where to start can be overwhelming. In this post, we will talk about how to set yourself up for success on your search for a new home. The steps outlined will provide a solid foundation to avoid mistakes during your home buying experience.
Before you start your search it is important to determine your limits. If you start your search before clearly defining your price range and fall in love with a house, it will be too easy to convince yourself to stretch your budget. The most convenient way to think about what you can and cannot afford is to figure out what monthly payment will fit into your budget and then work backwards to calculate the total price you can afford. There are many online tools that can take your monthly payment and convert it to a total mortgage value. Despite how much banks will approve you for, a good rule of thumb is that your monthly mortgage payment should not equal more than 30% of your gross (pre-tax) monthly income. Nerd Wallet has a mortgage calculator along with a down payment estimator. The down payment is another more straight forward aspect you need to consider when thinking about how big of a mortgage you can afford. With it being an upfront cost, a quick analysis of your finances will show you what down payment you can afford.
You can’t talk about the search for a house without the word compromise; the perfect house always seems to be just out of your price range. There are always trade-offs: the correct amount of bedrooms or the newer home, more square footage or the better location. The best way to stay disciplined in your search is to make a list of the practical needs that must be met based on what you see for yourself and your family in the future. The difference between that two sink bathroom and one sink bathroom will become much clearer when you have kids running around getting ready for school in the morning. With enough patience and time, you will be able to find the perfect house that actually matches your price range.
Buying a home is usually one of the biggest investments a person will make in their life, so it makes sense to do the proper due diligence. Not only could the inspection save you time and money down the line, but it could also give you some extra chips at the negotiating table if there are a few issues that you feel you could tackle. As most people are on a tight budget, don’t be afraid to walk away from a house if everything does not check out. Inspections offer a mostly visual analysis of the property, and problems on the surface could go deeper than what meets the eye. If you want to take on repairs, make sure you know what you are doing so that your dream home doesn’t become a fixer-upper.
By staying disciplined with your price range, making sure your future needs are met and conducting the proper due diligence, you set yourself up for a successful home buying experience. Taking the common sense approach to home buying is easier said than done, but staying disciplined will make some otherwise stressful decisions into easy judgements.
For more home buying tips, read out blog post, Things to Know When Buying or Selling a Home.