Have you been searching for a house and finally found your dream home, only to find out that it is more than your budget allows? If so, you may be wondering if you should go for it and make an offer or find something on the market that is cheaper. These tips will let you know if you are able to afford that home
Consider Your Future Income
One thing to keep in mind is that your current budget is most likely based on your current income rather than the income you'll have in the future. That is why it is worth projecting how your income will change over the next 10, 20, and 30 years. Take a look at your career path and what you can expect to make as you move up in your field. The nice thing about a mortgage is that your rate is locked in for 30 years, so as your income goes up your mortgage payment stays the same.
Consider All the Additional Costs
You may think you can cover the mortgage, but you also need to consider all of the additional costs with owning a home. A larger house is going to have higher property taxes, which can go up over the years. Do some research on the historical property tax increases for the city you want to buy in. Have they steadily gone up, or has there been a very long property tax freeze? This can give you a general idea of where you expect property taxes to go and allow you to determine how that fits within your budget.
Another cost that can increase over the years is your homeowners insurance. Get a quote from a local insurance agent based on the property you're interested in, and ask how they think those rates will increase over the years with inflation. It is typical for home insurance to cover rebuilding the entire home, and that cost will only go up along with the cost of raw materials.
Consider Your Current Debts
Your current budget will also be based off your current debts, since you need to stay below 43% when buying a home. This includes current debts that you are working to pay off, such as auto loans and student loans. Figure out when you are going to have these debts paid off, which will free up more income each month to go towards your home.
If you are looking beyond your budget and have determined you can't afford it, work with a real estate agent to help find something that works for you. A real estate agency, such as Celia Dunn Sotheby's International Realty, will help find something that matches your budget and your style.