Before you talk to a real estate professional about buying a new home, you want to make sure that all of your finances are in order. You want to make sure that you do not have any questions left about how the payments will work out once you have purchased the home. You will be spending a lot of money, so it is wise to know exactly how all of that money fits into your budget long before you spend it. Many people have become what is referred to as 'house poor,' and even lost their homes because they did not realize what it would cost to own them. After the purchase, they found out that they could not afford the homes they had chosen. In order to avoid becoming one of these people, make sure that you prepare your finances correctly. The following are a number of the things that you should do.
The first thing to do is to look at your savings to see what you can actually afford to spend. The larger the down payment that you initially put down, the less you will have to pay per month. If you would like, you can keep the same monthly payments and use this down payment in addition to your mortgage so that you can buy a nicer home. Either way, you need to know how much you really can afford to spend. Do not overcommit yourself. Only spend what you can afford at the time; let the mortgage take care of the rest.
Next, you will want to sit down and write out a budget so that you can see how much you can afford to spend each month on a home. This differs for everyone, but a good general rule to follow is that you should only spend twenty-five percent of your income on your housing. Now, if you have a good job and no family, you can probably afford to spend more than this. If you have four or five children, you probably want to spend less. The only way to know for sure how much you can pay each month is to budget everything out before you make the purchase.
You need to remember that the cost each month will not just be the mortgage payment on its own. You also want to have home insurance so that you investment will be protected. You will need to pay property taxes to the government. A real estate processional will be able to go over all of this with you so that you can see what your true payments would be each month when you factor in all of the costs. If this fits your budget, you will be ready to go.
Closing costs are added onto a sale. There are many different things that have to be added into these costs, but you could end up paying thousands of dollars. If you want your mortgage to absorb this, that is fine. You just need to remember, in that case, that the entire mortgage cannot be spent only on the price of the home, leaving you with nothing for the closing costs.