House hunting is an exciting time! Looking for that perfect home for your family can certainly get you caught up in the day dreams of kids playing and pets lounging, but there is a fine line between what you dream of and what you can actually afford. If you are considering buying a house, here are some tips for keeping you out of the risk of high payments and a potential threat of foreclosure down the road:
Outline Your Budget
One mistake people often make is worrying about getting preapproved for a loan before they take the time to figure out their monthly mortgage budget. While you may be preapproved for a $250,000 loan, do you know what that will actually result in a payment of? Between taxes, insurance and interest rates, your monthly payment could be much higher than you expect. Before heading to the lenders office, sit down and calculate what you can afford to sustain in a mortgage payment. Financial gurus recommend that your mortgage payment not exceed 20-25% of your monthly income.
Decide On A Location
People often wan to move to the fanciest area of town with the best schools, and rightly so; they often have the best resale values. However, that isn’t to say that there aren’t comparable areas of town with equally good resale values and schools for the kids. Take the time to do your research and select a few locations around town to view some neighborhoods. Drive around on the weekends and weeknights to see the activity level and safety factor of the ones on your list. Narrow your list down to two or three and discuss these areas with a realtor in terms of resale value. You may find that you can afford a nicer or bigger house in a neighborhood just off the beaten path of the fancy side for a more affordable price.
Lower Your Payment
One way you can save money in your monthly mortgage payment is by putting more money down. Sounds obvious, right? Well not only are you borrowing less, but if you put 20% or more down you also will be saving hundreds (thousands over the life of the loan) in mortgage insurance premiums. You can also lower your monthly mortgage payment by taking out a 20 or 30 year fixed interest rate mortgage instead of a 15 year.