Note: This is the second blog in a series where you can make choices about buying your first home.
Have you ever gone to someone’s home and thought, “Wow, what a spectacular house. I wonder how much a home like this costs?” Or, maybe you’ve started looking at listings in neighborhoods you’d like to live in, only to realize you have no idea how much you can afford.
A home may be the most expensive thing you will ever buy, and it can be hard to figure out how much you can afford. In addition to the cost of the home itself (the price you agree to pay the seller), there’s the cost of the mortgage (the price you pay to borrow money to buy the home), real estate costs associated with transferring the property to you, and ongoing taxes and maintenance costs.
How will you decide how much to spend on a home?
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I’ll ask a lender how much I prequalify for
While it’s important to meet with lenders to explore your mortgage options, a lender does not know your expenses, how you typically manage your money, or any future expenses you might be planning. A lender can tell you how much they are likely willing to lend to you, but how much a lender is willing to lend to you isn’t the same as how much you should spend on a home.
Only you can decide how much you’re comfortable paying upfront and each month — which means only you can decide how much to spend on a home. Create a budget that starts with your current expenses and includes future expenses you will have as a homeowner. Remember, a home comes with expenses like maintenance, repairs and other upkeep (some of these numbers you’ll have to estimate, for now, but you can always go back when you have more concrete estimates). You can find information on how to determine these estimates in “Owning a Home.” Deciding how much you can comfortably afford to pay monthly for your home is the first step to calculating how much you want to spend on a home.
Our “Owning a Home” tool has plenty of resources for anyone thinking about buying a home. Sign up for our “Owning a Home” email list to get an alert when we’ve published the next blog in our series.
I’ll decide how much I can afford
Great answer! Only you can decide how much you’re comfortable paying upfront and each month — which means only you can decide how much to spend on a home. Before you can decide how much you can afford to spend on a new home, you need to look at your current expenses. Then you’ll want to factor in the additional expenses that will come with owning a home, like maintenance on your roof and repairs on your appliances. You can find information on how to do this in “Owning a Home.” Deciding how much you can comfortably afford to pay monthly for your home is the first step to calculating how much you want to spend on a home.
Sign up for our “Owning a Home” email list to get an alert when we’ve published the next in our series. Remember, “Owning a Home” is a comprehensive suite of tools and resources that guides you through the mortgage process, and is a useful resource for anyone interested in buying a home.
This article by Erica Kritt was distributed by the Personal Finance Syndication Network.
