When it comes to buying a home, experts are pretty clear about the proper order of things – agreeing you should fit your mortgage to your finances, not to a house.
“Before you even start your search for a home this spring, it's crucial to know how much you can afford to pay each month,” says Freddie Mac Senior Vice President Christina Boyle, who stresses that there are a few important things to keep in mind as you calculate this figure.
Start by getting a handle on your finances. What do you earn? What do you spend? How much do you have in savings? Answering these questions will help you better understand how much home you can afford. Make a budget and use free online tools and calculators to determine how much you can afford.
Remember that your monthly expenses go beyond mortgage payments, so leave some room in your budget. Whether it's a new roof or a leaking faucet, homeownership can mean unexpected expenses. Be prepared to pay for such items, as needed. General maintenance, combined with utilities (an expense that can vary by home depending on its size and other factors), are added expenses to consider. Some neighborhoods also have homeowners' association fees to cover the cost of upkeep of common spaces.
Your lifestyle can also help you assess whether a particular home is right for you and your budget. Location is key in determining what you can afford. Some points to consider are whether you want to live in a suburban or urban setting, whether you need to be near specific schools and public transportation, and the potential length of your commute. These factors can affect the cost of a home and you should determine your priorities in advance of home and mortgage hunting.
Remember, getting pre-approved can help you act fast and make a confident offer, so talk to your lender now before you start shopping.