Whether it’s your first home purchase or you have lived in several different houses through the years, searching the market can be an exciting time. Every case is unique, and those searching for new homes typically have certain needs to fulfill or goals that they are trying to accomplish. One issue that many home buyers overlook, which can get them into trouble down the line, is affordability.
When you start scheduling showings, it’s best to stick to homes that are within your price range. Determining ahead of time what that range is can save you a lot of time and money when you start looking for your dream house. Home buyers will want to keep several things in mind when considering whether they can afford to purchase a particular house.
2 facts you need to consider are ‘income’ and ‘debt’
It might sound romantic to think of touring various homes and choosing the first one that comes close to your vision of a dream house. It’s not going to feel so romantic several years later, if you buy a house that you can’t afford and wind up facing a severe financial crisis because of it.
Before home buyers start touring homes, they should sit down and compile a list of facts. Included in this list should be their gross income. They will also want to list all recurring debts, such as outstanding car loans, student loans or other money owed to lenders.
Consider how much mortgage you might be able to afford
Once you have an accurate idea of how much money you earn through income and debts you owe, you can start to factor in a projected mortgage and other expenses. Real estate financial advisers usually say that total monthly debt should never be greater than 36% of your gross income.
If you use this formula as a guide, you will be able to restrict your home search to houses you can afford. Many buyers have purchased homes without crunching the numbers and ensuring affordability, only to later have a tough time making ends meet each month.
Stability and financial security should come with a home purchase
If home buyers fail to check affordability before closing on a new home, they might have a house that they love but struggle to stay financially solvent. Besides finding a home that you think is beautiful or has special features you love, or is in a prime location, etc., it’s good if owning the home in question brings you a feeling of stability in life, as well as financial security.
Does this mean that you cannot buy a house, unless you have great wealth? No, not necessarily. What is most important is that you put some time and effort into determining what you can afford, then work with a buyer’s agent who has your best interests in mind and will help you refine your search so that you will only tour homes that you’d feel financially comfortable buying.