Being house broke is not fun. That means all of your monthly income is going towards your mortgage payments, and that’s it. You don’t have anything left over to save, enjoy life, or doing any upgrades to the property.
Buying a house can get very expensive really quickly. If you’re not prepared and work within your budget, your property could cause you to go house broke.
To stop that from happening, we have four tips that will help you out.
Make a Budget and Stick to It
It’s one thing to make a budget. However, if you don’t actually stick with it, you did all of that work for nothing. When you make your budget, you need to stick to it.
There are two budgets to think of. The first is your monthly budget. That is one in which you divide your total monthly income over your fixed and then variable expenses. You should use this budget to help save for a down payment.
The other budget is your house budget. That is what you want to spend on a property, and what your absolute maximum price is. You’ll get this from getting pre-approved for a mortgage.
Look At Different Mortgage Options
Depending on where you’re looking at, what your monthly income is, and the status of the property, you could have other loan options available to you besides a conventional bank loan.
For example, a USDA loan would be a good mortgage to look into if you’re moving to a rural or suburban area. This loan helps make housing affordable. You could use a USDA loan payment calculator to see how the payments would factor into your budget.
Don’t Rush Into a Purchase
Rushing into something is likely to cost you more money, than if you took your time and did your homework. Rushing into a property can do two things: make you regret your house and want to move again, or miss out on a better value deal.
Don’t let this happen to you. Take your time looking at properties, researching the neighborhood to compare prices, and shopping for different mortgages.
Look Within Your Price Range
Although it’s tempting to look at houses that are at the top of your price range or completely out of it, you should stay clear of doing that. When you look at houses you cannot afford, you’re only going to see things that you really wish you could have. Then, you start to justify why you actually need these features which cause you to spend more money.
Remember, your mortgage payment isn’t the only thing you’re paying every month. If you start to push your budget past what you can afford, you’re on the path to being house broke.
When you’re getting a mortgage approval, just because you got approved for a certain amount, that doesn’t mean you have to buy a house worth that price. The pre-approved price is likely at the high-end of what you can afford.
Take the time to research houses, neighborhoods, mortgages, and even lenders. You may find that you’ll be able to get a better price if you do.
Rachel Slifka is a freelance writer and human resources professional. She is passionate about helping fellow millennials find success with their finances and careers. Read more by checking out her website at RachelSlifka.com.