How To Buy Your First Home Without Busting Your Budget

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Homeownership will always be an exciting phase no matter your age and status in life. It won’t even matter if this is your first time owning a house or not. As one of your significant investments, one needs to make sure you’re capable of buying a home without breaking your bank. 

This is especially true for homeowners wannabes who don’t have more than enough cash to pay for a house in full. It is critical for first-time homeowners to stick to their budget when buying a home. Here’s how to buy your first home without busting your budget.

First, Think About the 25% Rule

Experts claim that homebuyers should keep the 25% rule in mind when setting up a budget. The 25% rules dictate that your mortgage should not exceed 25% of your monthly income. This way, you know that you’re able to pay for your monthly mortgage without sacrificing your lifestyle. 

Lenders who offer home loans will determine if you are capable of paying back their money on time. They do this computing your debt-to-income ratio. For example, the house you want to buy totals to $1000 monthly, and you have other expenses totaling to $1500. Your future total expenditures would be at $2500. If your monthly gross income is $5000, your debt-to-income ratio will be 50%. You have to reconsider your mortgage or better, find cheaper properties to increase your chances of buying a home that your lender will approve.

Consider All Other Expenses Aside from Your Mortgage

Owning a house is not as easy and as glamorous as it looks. There are lots of other costs apart from the upfront cost and monthly mortgage. Make sure you have the necessary budget for proper homeowners insurance, utility costs, maintenance, and repairs. 

Good Read: 10 Facts You Should Know About Homeowners Insurance

Maintenance alone is no easy and cheap task. You’ll need to consider the investments you’ll be making to ensure your lawn is properly maintained and that your landscape is clean and healthy if the house you plan on buying has one. Unexpected repairs can also require a considerable sum of money, not to mention your HVAC system needs to be in tip-top shape for you to live comfortably in your new home. So, make sure to consider these expenses before you make the purchase.

Practice Living with Your New Budget Before Buying Your Home

Now that you’ve worked out all the expenses for your home including initial upfront cost, taxes, maintenance, and repairs, see if you’re up for the challenge of living within your new budget. Set aside your presumed expenses and save them up on your bank account. By testing the waters even before you take the actual dip, you can experience how it will be like once you’re already living in your home and living using the remaining budget out of your monthly income. 

What If You Can’t Afford Your Dream Home?

What if you’re disappointed with the house you can afford, or if you fail to succeed with your practice in living with your new budget? You have many options, and all you need to do is choose wisely.

Option 1: Postpone your home purchase and save up a larger down payment

Option 2: Buy a starter home, save up more money and sell that home until you can finally afford your dream home

Option 3: Buy what you can afford and renovate as you go by dealing with the possible hassles that may come along the way.

Know The FAQs About Mortgages

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You are dreaming of having your own house but don’t want to live paycheck to paycheck after? Mortgage loans offer the most flexibility when financing home loans but there’s a lot of things you have to know. Being a first-time home buyer can be both exciting and frightening. You don’t just choose a home, place an offer and get the keys. It’s not as simple as that. There are a lot of steps involved in the process of buying a home.  To help you with getting your mortgage approved or applying for home loans, we have compiled here the most common questions that first-time buyers have.

Which one should I choose – a variable rate mortgage or a fixed-rate mortgage?

The answer is it depends. It depends on the current mortgage interest rate and the specific financial situation.  Most fixed rate mortgages have rates that don’t change over the term of the mortgage while variable rate mortgages have rates that fluctuate on a daily basis depending on the condition of the market. Most first-time buyers opt to go with fixed-rate mortgages. They like to know how much they’ll pay every month. This scenario is most often the case for people starting in the real estate industry. 

However, if you are planning on selling the property, a variable rate mortgage is something you should consider. Finding a right mortgage professional, like Sparo Mortgage Broker Vancouver can help you choose which among the two will work best for you.

How can I know if the property I want to buy has a lien on it?

Before contracts are sealed, there are a lot of necessary steps that you have to do. Among these is the title search of the property you are planning on buying. Property liens can be very bothersome. It can even put you in an uncomfortable position if you assume these issues when purchasing a home. 

But first, what is a lien? It is a notice attached to a property which shows that the money for that is still owed. It can be for IRS liens when the current owner failed to pay back his or her taxes or a contractor who wasn’t paid in full.If a property has a lien, it is considered to be negative. The property should have a clear title before the lenders are willing to provide loans for a mortgage.

What are the fees associated with the housing market?

One of the things that a lot of buyers are going to ask is how much will it cost them to enter the housing market. Well, here are some fees that are related to real estates that you need to be aware of.

Generally, sellers pay most, if not all of the commission to the real estate agent. When it comes to deposits, you have to make sure it is ready. Also, you have to consider the down payment. These are the money that is on the collection up front. 

After purchasing a property, some of the costs that you have to shoulder are:

  • Escrow deposit
  • Title insurance
  • Property appraisal fees
  • Loan origination
  • Underwriting fees from lenders
  • Home inspection fees
  • Lawyer fees
  • Title search fees

Aside from that, you also have to consider the property insurance, property taxes, and utilities.

About Sparo Mortgage Partners

Helping first time home buyers or next home buyers is the foundation of our business.

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