5 Ways to Buy a Home That Won’t Bust Your Budget
Buying a house is one of the most significant financial decisions of your life. Many first-time buyers believe such a decision involves going “all-in.” Buying a house does not mean you have to overextend your finances. There are many ways that you can buy a home without busting your budget. With a little patience, research, and practical consideration, you’ll be on your way to buying your dream home.
- Tally Up Your Current Expenses & Assess Your Finances
The first thing you need to consider is your current finances. You’ll need to add up all of your current monthly expenses and compare them to your monthly income. Once you know how much you’re earning and spending each month, you can determine cost-cutting opportunities to increase your savings. Keep in mind that assessing your full financial health means also looking at your credit score. One of the best ways to proactively prepare for buying a house is to get preapproved for a mortgage so you know roughly how much your mortgage payment would be for a home in your budget range.
- Create a List of Must-Haves
One easy way to blow your budget while buying a house is to lose focus on what you need in a home. Before you begin your search: Create a list with three columns: Must-Have, Would-Be-Nice, and Don’t Need. Place the features and elements of a home in each column, such as a swimming pool, fireplace, two-car garage, and extra bedrooms. Add community features too, like proximity to schools, sidewalks, streetlights, and gated neighborhoods.
As you search, you’ll be able to assess each home under your unique rubric so that you’re only looking at homes within your budget that meet your needs.
- Plan for Increased Costs
Buying a house is costly, and considering the number of responsibilities it includes, many first-time buyers don’t realize how many additional costs are associated. From moving expenses and renovations after the purchase to repairs, replacements, and miscellaneous costs years into homeownership, the expenses quickly add up. One way to keep your finances comfortable is to plan these expenses into your budget. Setting aside $10,000 that would typically be routed to the listing price allows you to have a substantial budget for immediate expenses such as replacing your roof or purchasing new appliances.
- Purchase Less Than You Can Afford
Although it’s wise to avoid going over budget, you’re not required to spend every cent of your established budget. If you have a maximum budget of $250,000, search for homes in the $200,000 – $225,000 range. This strategy will allow you to remain competitive in the event of a bidding war without overextending your finances. Bidding wars aside, imagine buying a house and still having as much as $50,000 to spare! You can easily put that towards remodeling, repairs, or even as a rainy day fund.
- Search for “Undesirable” Homes
Here’s a secret many won’t admit: many “undesirable” homes are fantastic opportunities. While some buyers may be skeptical of homes listed on the market for too long, wise house hunters will see this as an opportunity to save some cash. Seek out houses that aren’t selling and discover why. It might be because it doesn’t have a specific feature that surrounded homes have. These slow-to-sell homes may also have motivated sellers who are willing to drop the price or negotiate on certain closing costs, which means you’ll be buying a house for a great value.
Buying a house doesn’t need to wipe out your bank account. With a little planning and preparation, you can buy a home without busting your budget.
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