Buying a home should bring a feeling of joy and contentment. However, many first-time buyers end up frustrated and disappointed after purchasing the house because they bought a property they could not afford.
Subsequently, they end up struggling with the mortgage repayments. Ironically, even though banking regulations like the 30% housing rule, recommend that mortgage costs should not exceed thirty percent of one’s income, it is still possible to get into a financial nightmare.
It could be that the property was too attractive for the buyer to resist, or the real estate agent was sleek and sweet talking. Whatever the reason, it is prudent to avoid home buyer’s remorse by knowing whether or not the home you want to purchase is within your means.
Here are some excellent ways of doing that.
1. Look at the Mortgage Terms
The cliche the devil is in the details is so true when it comes to mortgage terms. Take the time to go over the conditions of the financing.
Are they clear and straight to the point, or full of complicated mortgage jargon? Be wary of Loans with mixed mortgages terms such as first and second mortgage, interest only, extended-term, balloon payments or extended terms.
Moreover, be cautious if your agent tries to convince you to accept the loan terms, with the intention of refinancing the loan later. If you feel uncomfortable about the financing conditions, you are better off moving on to a different lender.
2. Do you need down-payment assistance?
To spur the growth of the housing economy, programs like the Down Payment Assistance plans exist.
Besides removing homeownership barriers, the program assists homebuyers in covering both their deposits and closing costs. If you cannot own or purchase a home without the program’s help, most likely you are buying a property that is beyond your means.
3. Do you need to borrow from your Retirement Account?
Saving for the golden days is undoubtedly one of the best decisions anyone can make. It guarantees a stable and peaceful retirement.
It is, therefore, counter-productive for you to withdraw funds from the retirement account to help cover your mortgage down-payment. Hence if the only way for you to purchase the home is by draining the retirement kitty, that is a home you cannot afford.
4. You can only cover the payment
There is more to home ownership than just making the payment. The property also needs to operate efficiently. For instance, in addition to the monthly mortgage repayments, you must carry out routine maintenance, and repairs of broken appliances.
All these have cost implications. So, if you find that after purchasing the property you only have enough to meet the repayments, the property is surely more than you can afford.
5. The purchase makes you feel bummed
Purchasing a home is by no means an easy fete. Arguably, it could be one of your most significant investment. It explains why most people feel anxious during the process.
However, if you know deep inside that you cannot afford the house, or you keep having the feeling that you are about to make the biggest financial mistake of your life, you just might be. Trust your intuition and move on to a more affordable purchase.
The secret to purchasing a home that you can afford lies merely in being honest and clear-headed when making the acquisition.
Do not let the excitement of owning a home, a sweet-talking real estate agent, or mouth-watering mortgage financial terms, cloud your judgment. After all, after putting pen to paper, you are the one who will be left grappling with the loan repayments.