Figuring Out Whether You Can Afford That Home

House hunting can be a brutal affair, particularly if you don’t know what you can afford beforehand. Know your price range in advance and you can avoid looking at really nice homes you’ll never get. Mortgage – Monthly Payments: The biggest cost associated with owning a home is the mortgage. Unless you are filthy rich, you are committing to apportioning a significant amount of your monthly income to your new home. In evaluating whether you can afford the mortgage, you need to consider the difference between the mortgage payment and what you are currently paying. If it is a significant step up, will you be able to pay it now and in a few years? Under no condition should you assume you will be making more money in the future. Base everything on what you are making now. When considering monthly mortgage payments, you also need to factor in the type of mortgage. Interest rates rise and fall over time. If you are taking the plunge on an adjustable mortgage, will you be able to make the payments if the interest rates increase over the next few years? In coming to a conclusion on this, you should assume the rates going up to the caps indicated in the mortgage for the relevant period of time. Again, you don’t want to get stuck in a financial bind because you let your eyes overrule your brains when selecting a home. Other Expenses: The pride of homeownership comes with a few extra costs. In gauging affordability, many homebuyers fail to take into account the twin evils of property taxes and homeowner’s insurance. The expenses associated with each of these necessary items can be surprisingly high. In some states, property taxes can be an ugly surprise the first year of homeownership. They may be due in a lump sum and can be thousands of dollars. If you fail to plan for them, your finances can become unbelievably strained. For many renters, buying a home can be a great move. Just make sure you can meet those payments without losing sleep.

Figuring out a comfortable budget is one of the best first steps you can take, and a local lender can help you see the full monthly picture. If you’d like help thinking through your options or a lender referral, reach out anytime through reynoldsrealty.com or call or text 941-737-6562. — Linda Reynolds, Reynolds Realty Gulf Coast