...but just not sure where to begin. This is a big step and you definitely want to make certain you have a strong foundation before you even look at the first house. One of the first things you need to do is get your finances in order and understand how much you can truly afford.
So often new buyers just kind of “fly by the seat of their pants” guessing how much they should be spending on a home. That may work okay for small purchases but definitely not on the largest financial investment you will most likely ever make!! As many of you know, you need to sit down with a loan officer, get pre-approved and figure out how much a lender will allow you to borrow. However....don’t stop there!! That is just the tip of the iceberg!! It is up to you to determine how much you can really afford....there is a huge difference.
Your loan officer will go over your income, debts, and credit score to determine how much they will loan you. However, they have no idea about your lifestyle....you need to factor that in. Do you like to take small weekend trips? Are you planning to go back to school? Do you have children or plan to start a family soon? What about your car? Are you looking to purchase another soon? Think before you leap. Either you are going to own your home or it is going to own you.
The best thing to do is figure out your budget....and, oh, how we hate to do that!!! However, if you don’t know where your money is going, how can you make adjustments needed for homeownership? Collect your spending data for at least a three-month span to determine how much you spend in a typical month on various things. You may be surprised you spend $100 a month on Starbucks or $300 a month going out to dinner and the movies.
Once you know where your money is going and have made adjustments in your spending habits, you can take the lenders information and determine what is best for you. I have actually recommended to several buyers to take the difference between what they pay now for housing...whether it is their current house payment or rent....and what the new payment will be, put that money in the bank and feel the pain of the new financial commitment before signing on the dotted line. That will not only give you a feel of how comfortable that monthly expense will be on your budget but will also give you a little nest egg to use on perhaps closing costs, window coverings or appliances!!
Dawn Lawson, CRS, ABR
Cutler Real Estate
Dawn@DawnLawson.com
http://www.dawnlawson.com/
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