When it comes to buying your first home and officially becoming a homeowner there’s probably a lot of thoughts running through your head. One of the common thoughts that everyone thinks about is how much they should be spending on their first home. To be fair, there’s always the golden rule that you should not spend what you cannot afford; however, this magical number that you should not surpass can become altered after learning the reality of how expensive home is, and we are not just talking about the initial price you can expect to pay. Owning a home comes with other expenses further down the line such as pool services (if your home has a pool), pest control, insurance for natural disaster coverage, trash pickup, and so on. These extra fees are not always mentioned right away when you go to purchase the home, which is why it is so important to do your research ahead of time. This can prevent you from making the mistake of going over your budget, a common mistake many first time homeowners make. The best way to avoid this mistake is to follow the tips in this guide brought to you by Ace Mortgage Services.
- The 25% Rule
The 25% rules are this cool rule of thumb method that our experts at Ace Mortgage Services recommend to all first-time homebuyers. This rule essentially says that your mortgage should not be more than 25% of your gross income each month. This rule was established as a way of determining how much is too much to spend and safe should you play it with your budget. Something important to keep in mind is how much debt you have to hang onto you. Having debt will also have to factor into how you decide your budget because chances are you are going to be paying off this debt while paying off your monthly loan. In this situation, we recommend you look at your debt to income ratio; you ideally want your ration to be under 43%. Being fewer than 43% will improve your chances of being able to get a mortgage from a qualified lender.
- Other Homeowner Expenses
This tip was slightly mentioned above; however, it is important enough that it should be regarded as a crucial tip when deciding how high or low your budget is going to be. When you get pre-approved for a home loan you have every right to be excited, it’s a big step towards making being a homeowner official; however, it is still only a step in the process. Getting approved for this step does not mean that the other homeowner expenses were taken into account yet. These are things you will have to take into account on your own. Expenses such as insurance, repairs, utilities, and maintenance are all things you will need to work out when deciding on your budget. When it comes down to it, it’s better to have too much money to cover these things than it is to have too little.
- Make Sure You Can Handle the Property
This tip may sound a little funky; however, there is truth to it when it comes down to your budget. You may be able to afford the larger home of your dreams, but that doesn’t mean you are going to be able to or want to pay for it when it comes down to cooling the home or repairing it. In this situation, you are going to want to go with a slightly smaller home that is more inexpensive; this will solidify that you can always pay for the home with no problems. Worst case scenario you have more money leftover than expected and can put it into a savings account. This is a better worst-case scenario than not having the money to pay for the larger home.
No matter what your budget is, whether huge or small, these tips can help you out further down the road. With these tips, you can prepare for almost every situation that can be thrown at you as a new homeowner. For any other homeowner questions, our team at Ace Mortgage Services is always a phone call away at (408) 244-1190.