There’s nothing wrong with wanting a big and an enviable house as long it works with your wallet. If you, on the other hand, don’t have the means to pursue what you want, it’s best to take a step back and consider other options. Failing to assess what you can comfortably afford can spell financial disasters in the future and make you house poor.
Those who are house poor spend a big portion of their total salary on paying for their home. These include loan payments, utilities, maintenance, and property taxes. Their house is the only asset they have, but they are struggling to afford it. You can find yourself in the same position if you buy more than what you can afford or buy an expensive house.
If you’re in the market of buying a new house, it’s important to have more than just a budget. Here are some of the things you can do to avoid being house poor:
Don’t spend the maximum amount of your mortgage preapproval
Getting a mortgage preapproval before house hunting is a wise move. What you shouldn’t do, however, is to look for a house that matches the amount of money the lender is willing to loan you. Keep in mind that the figure you’ll see on the preapproval letter is the absolute maximum of what you can borrow.
A much wiser move is to shop for houses below that amount. The best thing you can do, according to mortgage companies in Utah, is to find a monthly payment that fits your current income. You can also use a mortgage calculator to get an idea of how much your loan payments will be depending on the loan amount and term, down payment, and interest rates.
Be wary of buying a house that needs work
Apart from being at a lower price, a house that needs work will also allow you to renovate the place according to your needs and preferences. The sad part is, depending on the renovation needed and the scope of the project, it can cost more than a house in a good condition.
If you really want to buy a house that needs work, do take note that you’ll need to hire professionals to do the renovation. You also need to have enough funds to begin the project immediately. If the work is too extensive, it may be better to find a livable home and just renovate in the future.
Know the extra costs of buying and maintaining the house
Your financial responsibilities as a buyer go beyond the initial down payment and monthly mortgage payments. You also need to consider the closing costs, which refer to the fees charged when finalizing a house purchase. It is best to ask your lender about the closing costs to budget accordingly and to avoid surprises later one.
Apart from the closing costs, you should also think about the upkeep and maintenance costs. Focus on the monthly and annual fees, and account for these costs from the beginning. You can do your research about these expenses or ask your seller to provide you with an estimate.
Do some research on the process of buying a home and all the related expenses. It is also a good idea to work with a reliable lender and real estate agent.
