Buying a home is often one of the largest financial commitments of a person’s life. If you’re thinking of purchasing a new house, you may be overwhelmed with all the mortgage options and expenses that seem to go along with it. While there are many small factors to consider, the following tips can help home buyers get back to basics and create a budget that works for their needs.
How to Financially Prepare for Buying a New Home
1. Dig Into Your Monthly Spending
Before you determine what you can spend on a home, you need to understand your current spending habits. Look at your bank and credit card statements from the past three months or more. Break spending down into categories like rent, utilities, essential spending like groceries, and discretionary funds like impulse purchases or nights out. Determine what, if anything, you can cut to save for a down payment or increase your budget for a monthly house payment.
2. Avoid Major Purchases
Your credit score can impact your mortgage rate since lenders want to work with people who are financially responsible and pay their bills on time. Lenders check your score when you get preapproved and again leading up to closing. Major purchases that involve opening new credit accounts or soaking up most of your existing credit can negatively impact your score. Instead, stick to your normal monthly expenses and pay bills on time to maintain a high score.
3. Consider All Expenses When Creating Your Budget
Some home buyers just shop for homes within their preapproval range, but it’s important to consider all the additional costs that go into buying a home. Expenses like mortgage insurance, homeowners insurance, and taxes are generally rolled into your monthly payments. There are one-time expenses, like closing costs and movers, and ongoing maintenance or renovations to the home. Create a budget for each category and use a mortgage calculator to determine a monthly payment that works for you.
If you’re looking to sell a home in the Phoenix, AZ, area before buying your next place, contact Top Key Homes. The team of real estate experts can help you simplify the sale of your old place, so you can dedicate all your energy toward finding your dream home. Visit the website to learn about the process, or call (602) 575-8016 to get a quote.