One of the biggest mistakes you can make as a homebuyer is not knowing how much you can REALLY afford when purchasing a home. The next mistake is thinking too “big picture” when it comes to price range or purchase price.

Stop right here before you make these mistakes!

You’re going to learn the correct way so that you get a mortgage you can afford and, ultimately, a home you absolutely love on your budget. You won’t be “house poor” and you won’t shortchange yourself either.

Here’s how:

Think monthly payments first and foremost.

Don’t focus solely on the purchase price, but rather first start with your desired monthly payment for your home. This monthly payment should factor in your taxes and insurance (but not utilities and general monthly maintenance). This Mortgage Rule of Thumb may seem backwards but it’s the one and only way to make sure you get the home you want for the price you want. Here’s why.

Even if the purchase price is exactly the same, your monthly payment could be very different between two properties.

For example, the monthly payments for a $500,000 condo will be completely different than for a $500,000 single-family home. There are different costs you’d need to consider for each option, such as condo fees.  That’s why you should NOT focus on the purchase price first since monthly payments can vary depending on where and what you buy.

So never begin your search with a blanket statement, “I want to spend $500,000,” and not even know whether that amount will truly fit your monthly budget.

Don’t just accept what any lender says you can afford.

Unfortunately, many buyers start with that blanket statement of price because their lender pre-approved that amount for them. Don’t think you’ve hit the jackpot, since many lenders will approve a mortgage for you that could be way more than you are comfortable spending per month. Buyers may say, “I’ve been approved for $500,000 by my lender,” but when you dig a little deeper, these buyers actually want to spend a lot less in order to get the payments they truly want to commit to each month.

Many lenders will approve you for the highest purchase price possible based on several “big picture” financial factors, but it doesn’t really keep in mind what YOU want to pay per month on a home. The lenders that are a part of MY TEAM make sure to give us not only the purchase price we need to look in, but also the estimated monthly costs that include taxes and insurance, so we can make sure we are looking in the price range you’re comfortable with- not just what you’re preapproved for.

Don’t hesitate to contact me if you have any questions about calculating a monthly budget and we can talk with my lender (free of charge, of course). It’s the most important first step before you start looking at homes.

Buying a home all starts with an initial meeting between us to get the big picture more clear. I like to hear from my clients a several months before they plan on doing anything (although we can move faster if you’re ready now) so if you want to do this within the next 12 months, be sure to reach out by email— I can’t wait to hear from you. In the meantime, enjoy this guide and get armed with information.

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