How to balance homeownership expenses, before and after purchase
Posted on Monday, September 22, 2014 at 12:05:54 PM
Buying a new home is a serious financial investment - and a step that should not be taken lightly. For many fledgling homeowners, the financial side is one of the hardest to manage. Thankfully, according to Black Knight Financial Services, yearly home price appreciation is slowing, with only a small uptick on a monthly basis.
This, coupled with more affordable residential financing rates, could lead to better homebuying conditions across the country. If purchasing real estate sounds like something in your future, Home Loan Investment Bank's Patrick Deady recently offered some crucial advice that might help you navigate the housing market.
For starters, he explained that homebuyers can determine how much home they can afford by first meeting with a reputable mortgage lender to go over the size of the loan they'll qualify for.
"They can also learn the monthly payment, which correlates to the mortgage amount as well as the likely cost of taxes, insurance and mortgage insurance, if applicable," Deady added. "Once those numbers are determined, the prospective homebuyer should review their monthly budget to determine their level of comfort with the payment. After reviewing all other expenses, including credit cards, cell phones, gym memberships and more, the prospective homebuyer will have a better feel for affordability."
Don't forget that it is possible at this stage to reduce the residential financing amount down to something more cost-effective.
"Of course, if they feel that the payment is too high, they should reduce the loan amount they intend to request," he noted. "A good way to shore up their finances while determining affordability is to save the difference between their existing housing payment and what they intend to spend monthly on a new mortgage payment. They will save money and gain confidence that they can make the payment."
Once this is complete, it is time to make the purchase. Saving money doesn't end there, however, and homeowners can implement a few more tricks to keep their budget on track, according to Deady.
- Choose a fixed-rate mortgage where the interest rate is fixed for the life of the loan. The mortgage payment will not rise, except for insurance and tax increases.
- Set aside funds for monthly maintenance of the property. For example, an exterior paint job can big a big expense if not planned for. Part of a budget should include paying for such needed maintenance items.
- Never forget about the monthly budget. Do not make a purchase that does not fit this plan. Only adjust the budget when there is additional income or after careful evaluation that an increase in budget is acceptable.
Armed with these tips and tricks, affording a home and keeping a budget on track will be an easier proposition.