Mortgages are complicated and stressful, not to mention possibly the largest financial transaction of your life. It is important that you choose the right loan, the right mortgage banker, and get the best rate. So how do you coordinate all of these things and still manage to close on your home? Read more to find out.
Buying your first home or even finding a new one is an exciting prospect. Sometimes we can get swept away with features we want in our new homes. I often daydream of a backyard retreat with giant pool, kitchens with industrial-grade appliances, bathrooms with two tubs and a steam shower. Sure, it’d be nice, but in reality my ideal home is way outside of my budget – make that light years from my realistic budget.
So let’s bring things back to reality and think about what you need your new home to have. Check out the tips below to help keep get you on track when you start house hunting.
Create a Budget
One important thing to do before you start is find out how much you can spend on a house. The general rule of thumb is about three times your annual income. Once you figure this budget out, you can use a mortgage calculator to better understand your mortgage monthly payments.
Using some kind of budgeting program, like those offered by Quizzle or Mint, will help give you a clear picture of how your mortgage payment fits into your monthly expenses holistically. You’ll want to make sure you have plenty of money left over at the end of the month for savings and other miscellaneous items.
Prioritize What You Need, What You Want and What You Can Live Without
Sit down and think about what your new house absolutely, without a shadow of a doubt, must have. We’re not talking about a bathroom, kitchen or bedroom either. Those are fairly standard for most homes. Think about whether you need to be closer to work to have a better work-life balance. Do you need it to be two stories? Is this house close to a good school? We’re talking the essentials – things you cannot live without.
Next think about what you want your new home to have that your current home doesn’t have. Think of these as upgrades. Maybe you want a master bathroom so you don’t have to share with the kids, or maybe it’d be nice to have a garage.
Now you get to have some fun. The final part of your list is the wish list, or things you’d love to have but could probably live without. Things like pools, a guest home, a theater room, 9-person hot tub, home bowling alley, etc. Get it all out of your system.
Cut Out the What Can You Live Without
The pie-in-the sky stuff, like your own personal basement bowling alley, would be nice; however, you can probably continue to live perfectly fine without it. Is it worth it to spend thousands of dollars more on those luxury items when you could use that money elsewhere? Seriously, stop thinking about the bowling alley. We’re moving on now.
Take Your List and Start House Hunting
Speak with a real estate agent or just start looking at homes online to see what homes are out there and compare them with all of the items on your list. This will help you see if you can get everything on your list within your budget. If you can’t find a home you can afford with everything you want, it’s time to re-evaluate.
Re-evaluate Your List
Maybe you’re finding that houses with the all the items on your list aren’t falling within your budget. Look back at your list and see where you can cut. Remember, you can always change things like flooring, carpet, paint, cabinets and appliances. Homeowners and sellers often remodel or update homes to get an increased return on their investment when they decide to sell.
An updated, ready-to-use kitchen would be great, but maybe you can use the money you save on a lower priced house to update the kitchen later. You might even save money by doing the work yourself.
Finding the right home might make you want to pull your hair out. Preparing ahead of time, knowing what you really want in a house and having the right expectations makes the process easier and less stressful.
Do you have any other home hunting tips? Share your experiences with other Zing readers in the comments below.