June 9, 2011

What’s Your Home Buying Budget?

Are you thinking about home ownership? Well, the first thing to figure out is if you can afford it! How much condo or house can you afford to buy? What type of mortgage can you handle that still lets you have a comfortable lifestyle? These are all important questions to start asking yourself before you even start your home search. Check out the tips below to help you calculate what your home buying budget is.

Know your loan options. Fixed rate or variable interest? Mortgage insurance? What is best for your situation? It’s also good to plan out how long you will need to pay off your mortgage. With the new mortgage rules that came into effect in March, your options for an amortization period have changed. If you have a real estate agent, he/she can probably recommend a mortgage specialist or talk to your bank about what they can offer you. Remember to mortgage-hunt as much as you would house-hunt because this may be the biggest financial commitment of your life – so make sure to choose wisely.

Use a mortgage calculator. Hate budgeting? Well get over it. You may not be an accountant but learning how to crunch your own numbers can make a big difference in limiting your debt stress. Most bank websites have online mortgage calculators that help you figure out what you can afford. Knowing what your price range is will also help you to find the right house. It’s a good place to start your search as narrowing the field will save you time.

Establish your range. Consider getting pre-approval. It can be as easy as filling out an online questionnaire. Based on your current financial situation (determined by the answers to questions such as: how long have you been at your current job, what is your salary, what is the value of your combined assets), you may be eligible for a pre-approved mortgage. With a concrete number, you will truly know what you can afford and determine what the maximum is that you are willing to spend. Besides, by having a certificate that shows what terms a specific lender is willing to provide you (and for how long a duration), if you get into a situation where you want to make an offer on a house, this may win you the bid. Imagine if you were the seller and you were presented with two offers – and only one had a pre-approved mortgage to back it up with. Which would you see more seriously?