Saturday, November 2, 2013

Buying a home: Step 1 – Understand your means

Buying a home can be very scary, especially if it’s your first time. That can be true for anything new you try! As with anything new, it’s important that you understand the process and plan ahead. The first step in the process of buying a home (whether it’s your first home or your tenth!) is to understand your means.

It’s very important to talk to a mortgage broker to understand a) IF you qualify to buy a home and b) what amount of money you qualify to borrow. However, just because you qualify for a certain amount, doesn’t mean you can actually afford the monthly payments! It all depends on your lifestyle. Do you like to travel? Do you go out to eat a lot? Are you a fashion fanatic? All of these things and more will impact how much you can afford when buying a home, unless you want to change your lifestyle completely. And who wants that? No one wants to be house-poor… right?

When talking to your lender, make sure to ask questions so that you understand what the payments will be at different price points. You may qualify for a $500,000 mortgage, but how much do you have to put down? What will the payments be? How much will the payment be on a $400,000 house? You get the point. Then go home and run the numbers. You have to decide if there’s any part of your current lifestyle that you’re willing to sacrifice to buy a home. Or maybe you won’t have to sacrifice anything, but you will need to prioritize so that you can understand what sort of monthly payment will be comfortable for you, without having to resort to eating ramen noodles for dinner every night.

Not all Mortgage brokers are the same. Make sure you speak with more than one and understand that the size of the bank or banks they represent might impact the size of the loan you qualify for and the rate you’re quoted. Bigger is NOT always better when it comes to banks. If you need help finding a good lender – feel free to reach out to me.

Sit down with your family and put a budget together. Decide how much you’re willing to pay per month, what that translates into for a 30 year mortgage, and stick with it!

PS – There’s a reason why Step 1 is ‘Understand your means’ and not ‘Choose a location’. Stay tuned.

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