Love Buying a Home Series

The “Love Buying Your Home” series will take you step-by-step through the entire home-buying process — from finding a buyer’s agent to settlement day, and even to maintaining your home after you’re all moved in. Every first-time buyer will find this information-packed series easy to follow and understand. Make sure to tune in for the next few weeks!

One of the biggest mistakes that people make when buying a home is not truly knowing how much they can afford. I always want my clients to think about how much this home would cost on a monthly basis. It makes the number much easier to grasp and manage.

Have a mortgage you can afford… not the highest price you’ve been approved to buy.

Don’t focus solely on the purchase price or the highest price you can be approved for, but rather first start with your desired monthly

payment. This monthly payment should factor in your taxes and insurance (but not utilities and general monthly maintenance).

Think Monthly…

This Mortgage Rule of Thumb may seem backward but it’s the one and only way to make sure you get the home you want for the price you want.

Something that is important to note is that even if the purchase price is exactly the same, your monthly payment could be very different between two properties.

For example, the monthly payments for a $400,000 condo will be completely different than for a $400,000 single-family home. There are different costs you’d need to consider for each option, such as HOA fees.  So never begin your search with a blanket statement, “I want to spend $400,000,” and not even know whether that amount will truly fit your monthly budget.

So… how do we determine your monthly budget?

Dig into your budget and determine how much you want to spend each month.

To do this, first make a list of all the costs of homeownership. Include things that will be in your escrow account as well. Like, Property taxes, mortgage insurance, home insurance, maintenance, utilities, and even HOA fees.

List all of the expenses you currently have that you expect to continue, like groceries, gas, car loans, gym memberships..etc.

Include maintenance costs for a home. A good rule of thumb is to include 1% of the homes purchase price as maintenance per year.

Don’t forget, you will have tax advantages as a homeowner! You will have tax deductions as well as equity in your home, so you will likely reveive a larger refund than you are used to.

Include other costs like new furniture, or other expenses that might come up like hobbies or lifestyle choices.

Consider what you have been paying per month already

Have you been able to meet your monthly savings goal comfortably? A mortgage will likely be more expensive than rent, so taking a look at your current situation can provide clarity as to what would be comfortable for you. If you aren’t paying rent, start making “practice monthly payments” If you have been approved for a mortgage that will run you about $2,000 a month, put that same $2,000 a month into a separate bank account. Do this for a few months to get a feel for your financial situation. Not only will you be saving up for your downpayment, but you will have much more clarity about what $2,000/ month feels like.

That’s why it’s important to ask yourself what you’re truly comfortable spending on your monthly mortgage payment.  And — this is even more important — it’s okay if that amount is lower than what’s approved. In fact, that is how it should be! Most people get approved to buy a home at a price much higher than they want to spend.

Not sure how to come up with your desired monthly payment?  This is something we can talk about and I can help you with what you should consider when making that decision. 

Keep coming back here each and every week to learn more about the home buying process and reach out to me through email at mccall@youragentmccall.com anytime with questions about how what you are learning applies to YOUR specific situation.  Just like every real estate agent is unique, so is every buyer and I’d love to help you apply what you are learning in this series to YOUR home buying plans.