How to Find a House You Can Afford

Unless the money is coming into the bank every month, it cannot be considered income.

Despite the fact that the economy has made a comeback and home sales are on the rise, finding a home that you can actually afford can be difficult. Regardless of whether you are newly married, a young professional or an empty nester one of the major questions you will be faced with when trying to find a place of your own, is just how much house can I afford.

Here are a few tips for helping you find a house that fits both your needs and budget:

Budget

Calculating a realistic budget is key to making sure you don’t end up spending too much on your new home. In order to arrive at the proper number you must take an objective look at your finances. Investigating your finances is important because in most cases a bank will approve you for a bit more than you can probably realistically afford, as they are not privy to every little expense you occur on a monthly basis.

First, factor in your earnings and any other sources of income that you have, do not include future, hoped for raises or promotions. Unless the money is coming into the bank every month, it cannot be considered income.

Now, take a look at your debts. You will need to include all of your current debts, monthly bills as well as near future debts. Do not forget to include expenses such as groceries, cell phone bills, car insurance and even nights out on the town.

Include estimates of expenses that will pop up once you buy a house. Homeowners insurance, HOA fees if they apply, landscaping, and new, probably higher utility bills should all be considered. Remember that property taxes will be rolled into the payment, be sure to account for those as well. Funding a rainy day fund should also be part of your planning.

Once you come up with a monthly number consider having a financial planner review your calculations. They may be able to point out expenses you missed or areas that allow you to up your potential monthly payment.

Compare this number to your pre-approval from the bank. In most cases it is best to limit your budget to the number that you calculated.

Now Go Find an Affordable Home

Finding a great house that falls within your budget can sometimes be difficult. Scour house-hunting sites looking for homes that you can afford. Enlisting the help of a real estate agent can make the search easier, they often have access to homes before they go on the market and can point you to neighborhoods you may not have considered.

If traditional methods are not bringing up your dream home, it may be time to consider a few alternatives.

While not as common as they were during the recession there are still plenty of foreclosures and short sales on the market. These can be fantastic opportunities if you have loads of patience and are not in a hurry to get into a new home. Foreclosures are generally sold below market value, using either a traditional sale or an auction setting. In many cases foreclosure homes will be in less than perfect condition so be aware of repair expenses.

Short sales occur when the bank holding the note on a mortgage that is in arrears allows the owner to sell the house for less than they owe on the mortgage. Short sales can be a real bargain, but the process can be lengthy and frustrating. Your offer must not only be approved by the seller, but the bank holding the note as well. Waiting for an answer from the bank can often take up to a month or more.

Short sales house are often in a distressed condition so consider the cost and time to make repairs on the house. If you choose to go either of these routes be sure to have a home inspection done. If there are any major structural flaws, or mold problems, it is often best to move on to the next house.

Closing on Your New Home

Closing costs can be expensive. If possible negotiate for the seller to pay all or at least a portion of closing costs. This can be a major savings of cash on hand so pushing for closing costs is a great idea.

Another major expense to consider is homeowners insurance. Shop around for a policy, prices can vary dramatically between insurers as they rate risk differently. Experts recommend gathering quotes from at least ten different insurers. At HomeInsuranceKing.com, we compare up to 12 different homeowners insurance coverages for you so you don’t have to waste all that time shopping around. Our state assigned agents are experts in your local area and enjoy working with you to compare the best rate and coverage for you and your family. While price is an important consideration when looking for home insurance, we want your new home to be fully protected with the proper coverage. Work with one of our local agents to make sure you are properly covered.

Once the closing is done and your homeowners insurance is in place all that is left to do is move in and start enjoying your new home.