Each spring, our Deerwood Bank lobbies are filled with excitement as many people come in to review the homebuying options that they have in front of them. While buyers must go through a few steps on the path to purchasing their home, the most important of those is the first step – figuring out just how much house you can afford.
To help you understand whether or not you can afford that new dream home, we’ve put together three items for you to consider:
1. Review your budget.
This might seem like an obvious first step in your home buying journey, but you would be shocked to find out how many buyers come into our offices completely unprepared to discuss how purchasing a new home will fit into their budget. It is important to crunch the numbers on your entire financial situation and then play around with some of the home prices in your potential housing market. Looking for an easy way to acquaint yourself with some loan numbers? Go over to our mortgage calculator and start plugging in some digits! I think you’ll find this tool to be educational (and fun!).
It is also helpful to get prequalified with a local mortgage lender. If you find a quality lender, they will work together with you to determine what a comfortable price range will look like for your house hunt. IMPORTANT: a good lender should also caution you about the other expenses that may be impacted by purchasing a home – your mortgage shouldn’t be the top amount that you are prequalified for, but instead it should be what you can actually afford.
2. Consider which home loan options best fit your needs.
When you feel like you have a budgeted plan in place, it is a good time to look around and compare the different types of loan options that are available to you. Whether it be a conventional fixed-rate mortgage or a niche loan product – such as a government-backed loan, it’s important to look at each available loan type and determine the pros and cons that each will offer you.
A good lender should be able to walk you through the many loan options available and will also provide you with feedback on the benefits and drawbacks for each of them.
Side note: you should probably be wary of adjustable-rate mortgages. If you know that you are going to sell prior to your interest rate getting adjusted, then it might be fine, but if you are planning to stay at that property for a longer period of time, it can become somewhat risky to gamble on what interest rates will be in the future.
3. Remember the additional costs that come along with a new home.
One of the biggest mistakes that I see new homebuyers make is that they do not plan and budget for the other costly items that come along with purchasing a new home. It is important that you remember that owning a house is expensive – utilities, property taxes, home repairs, and closing costs on the purchase itself can all add up. Make sure to consider these items when building out the budget for your house hunt.
Oftentimes buying a home is the biggest purchase that you will make in your lifetime, so take it slow – craft a game plan and stick to your budget. By doing this you are setting yourself up for success in your new home.
If you ever have any questions regarding the mortgage process or Deerwood Bank’s suite of loan products, please reach out to me or a fellow teammate. We’d love the opportunity to partner with you on your home buying journey!