There are numerous calculators available that try to tell you how much you can afford to spend on your new home, but they’re not accurate for everyone. That’s because each person’s situation is unique. So before you buy that beautiful lake home in Southern Maine that you’re pretty sure you can afford, consider the following details to make sure you truly can pay for it.
Income vs Expenses
One of the most important aspects of deciding which homes you can afford is your income. You need to have enough money coming in every month to make your monthly mortgage payment on time. But determining your expenses is just as important, because even if you bring home $8,000 a month, you’re not in a great financial situation if your expenses match that number exactly.
Only you know all of your monthly expenses. Many mortgage calculators only take into account certain expenses, coming up with a figure that might not actually fit reality. For example, your basic expenses that are factored in might include credit card payments, student loans, cell phone bills, and insurance. But maybe they don’t take into account the fact that you like to go out to eat a few times a week, or that you spend a considerable amount of money shopping.
So make sure you account for all of your expenses before you calculate how much house you can afford. And if you’re not happy with the number you get, you can start deciding which expenses you can cut so you can afford more house. Make sure you factor in the amount of money you want to put away in savings and retirement accounts.
If you’re a first time homebuyer, you should also account for all the expenses of owning a home. For example, you might need to make payments to a homeowner’s association, trash pickup services, and of course all utilities you use. These expenses can be a shock to people who are used to renting. In addition, you’ll need to have money set aside for repairs, such as if your water heater or furnace breaks.
Your Down Payment
If you are hoping to reduce your monthly mortgage payment, you’ll need to put a decent down payment on your new Southern Maine house. Many people save up money for years so they can put at least 20% down. Another way to get a large chunk of money is to sell your current home and use the money you make – if you have equity in it – to help pay for your new house.
Of course, these tactics take time and patience. If you don’t have either and are hoping to buy a house in Southern Maine within the year, you may be able to get a down payment faster. You can do this by asking a close friend or family member if you can borrow the money you need. If you get a gift of money from a loved one, you can put that toward the down payment, too.
Some homebuyers choose to borrow from their 401(k) or IRA to come up with a down payment for a house, so this is another option. Just make sure you calculate any fees and taxes you will have to pay when you do this.
If you want to find out which Southern Maine house you can afford, contact Veronica Schneider to get started on your search for your dream home.