Most first-time homebuyers envision pride of ownership with a hypothetical mortgage being similar to the amount of their current monthly rent payment. However, more often than not, new homeowners miscalculate their budget. Learning from their own mistakes, many discover that owning a home is much more than making a monthly mortgage payment. In addition to monthly taxes, gas, water and electricity bills, a home requires regular upkeep and repair. Combined, it could end up costing the new home owner significantly more than originally budgeted. So, while buying a home is a good investment, before signing on the dotted line, buyers need to ensure that they first meet with a mortgage professional, who is going to thoroughly assess their situation in order to avoid future financial troubles.
SEEK PRE-APPROVAL FIRST
Often, buyers set themselves up for disappointment by trying to qualify for a mortgage that is greater than they can afford. However, there is a way to minimize the stress and reduce levels of anxiety. A simple pre-approval can save a first-time homebuyer an enormous amount of both stress and time. Imagine going through a hundred homes, because you are looking for that perfect home in that perfect location, only to find out that you cannot afford it! Let’s face it – no one likes to lower their standards, so why not set them right from the beginning?
PLAN AHEAD
After receiving a proper financial assessment from a licensed mortgage professional you will find out the maximum value of the home that you can afford. However, the second biggest mistake that new homeowners often make is going for the limit. Although it might be tempting to use up all of your financial power on buying that perfect spot, you might want to consider going for a place which would cost 80% of that budget. That way the other 20% could be put towards a savings plan, which could prove to be very useful during rough times. Remember that while backing out of a rental agreement is as simple as packing up and leaving, backing out of a mortgage commitment means losing your investment. Being able to differentiate between how much you can afford and how much you want to afford is key in making an educated buying decision. It is important to determine a price range that you are comfortable with, establish low-end and high-end price points, and start looking for houses in the low-end of the price spectrum.
