Everyone knows you go to the lender for a pre-approval to
determine what you can spend on your new home; but, is that the best
determination? Sure it gives you a
maximum to spend. What it doesn’t tell
you is what you, personally, can comfortably afford.
What you should do, in conjunction with the pre-approval
from your lender, is draft a budget.
Figure out how much you have coming in each month, what you’re estimated
expenses will be (i.e. food, utilities, insurance, car, etc.) and what you have
leftover. From that you should be able
to determine what you can comfortably afford as a monthly mortgage payment.
Don’t forget to factor in a savings plan. Generally an amount of 5% of your mortgage payment is a good target. You need to save for those major repairs and
maintenance issues that are part of owning real estate. Roof repairs, furnace/AC replacement,
plumbing issues – they are all bound to happen at some point.
So don’t just look at the maximum you are approved for look at what you can comfortably fit into your budget.
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