Sticking within your budget is a must when shopping for a new house. Ideally, you should go below budget so that you’ll have room to pay for those inevitable, unexpected repairs and other expenses, and you won’t have to spend so much on a monthly mortgage payment that your quality of life and retirement savings suffers.
According to the latest US Census Bureau survey, the average American homeowner with a mortgage spends a median of $1,500 a month on housing costs. To determine how much you should budget for, one of the first steps to take should be to definitively answer “What price home can I afford?” using an affordability calculator. When you get preapproved for a mortgage, the lender will determine how much it thinks you can afford to spend but that isn’t necessarily what you should spend as it typically doesn’t take into account overarching financial obligations or personal budget.
Once you’re ready to start house hunting, here’s how to stick within your budget.
Communicate Your Goals to Your Real Estate Agent
It’s essential to communicate all of your needs and ultimate goals with your realtor, including your budget. Be sure to emphasize that you must stay within it. If you have a good agent, that person will respect your wishes by showing you only homes that you can afford. If the agent tries to push you on this, remain firm or look for someone else.
Place Offers On Homes That Aren’t Selling
If you’re having a tough time finding what you want, you might try placing offers on desirable homes that aren’t selling. The seller is likely motivated and willing to drop the price if it’s been sitting for a while and that doesn’t necessarily mean there are some hidden defects. It could be that there’s been more inventory than buyers in the market, or perhaps the home lacks curb appeal, something that’s fairly easy and inexpensive to correct.
Even if the seller won’t budge on the price, there may be another opportunity like asking for contingencies to repaint the exterior of the home or replace worn carpeting. If you can determine the reason it hasn’t sold, there’s a good chance the seller will at least provide a cash allowance for you to get the issue fixed.
Try Not to Get Too Emotional
Many homebuyers, especially when buying a home for the first time, get emotional during the process. They think there’s only one “right” home and that no other will do after finding it. But a house isn’t your soulmate, it’s one of the most important financial commitments you’ll make. Home buying mistakes can have huge, long-term financial consequences, so it’s important to think about it as more of a business decision than a personal one, keeping a clear head to make the best choice possible, within your budget.
Be Ready to Compromise
Compromising on your budget isn’t okay, but you’ll want to be prepared to compromise when it comes to some of the things on your wishlist. Creating a list ahead of time can help, including must-have features and features you’d like to have but aren’t essential.