Are you ready to make the big move and buy your dream home? That’s great news, but diving in too soon can land you in a fix. You need to get a head start with financial planning to buy wisely and stay comfortable in the long run. It also helps you seal the deal faster. So before you start browsing the local real estate listings, figure out what you can actually afford.
Did you know that 73% of adults fall for impulse buying? Imagine how problematic the situation can get if you follow your gut while buying real estate. You shouldn’t do that with such big-ticket purchases, right? Committing to a realistic budget does the trick, so you must chalk it out sooner than later.
What’s the secret sauce to determining a realistic home-buying budget? Surprisingly, the calculations are easier than you imagine, even if they sound like a lot of work. But people fail to pay attention and shop without thinking twice because they are often scared by the math of budgeting.
Lucky for you, we’ve got a checklist of factors to help you crunch those numbers and start your home-buying journey with a realistic budget.
Consider your income
First things first, you need to know how much cash you’re bringing in every month. Your income should be the foundation of your home-buying budget if you want to keep it realistic and affordable. Look at your monthly take-home pay instead of your gross salary.
Think of the cash that ends up in your wallet after taxes and other deductions. The number determines how much you can afford after covering your expenses and setting aside something for savings. That’s the limit for your monthly mortgage.
Determine your debt
Let’s accept it. Nobody likes debt because it tends to stick around forever. Before you compute your home-buying budget, take a good look at your debts. These include your student loans, car payments, and credit card balances.
At this point, you must also check your credit score because this number determines the ease of getting a home mortgage. A strong credit score is essential whether you want to buy a place in the US or Singapore.
Save like a boss
Your savings are the starting point when it comes to setting a realistic budget for buying a house. You must start early and save up enough for the down payment and closing costs. That’s when you are actually ready for the purchase.
The average down payment sits at 15-20%, though it may vary from lender to lender. If you plan to buy a house in Singapore, the best home loan singapore is the one that accepts the down payment you can afford. Experts recommend paying as much as possible upfront so that you can lower the monthly payments and interest rates.
Get pre-approved for a loan
Remember to get pre-approved for a mortgage to ensure that your home-buying budget is realistic. Pre-approval is like a golden ticket for potential buyers because it shows sellers you mean business. It also gives you a clear picture of how much cash the bank or lender is ready to lend you.
But don’t consider it a green light to max out your budget. You should still stick with a payment that’s comfortable for you.
Consider the hidden costs
Before you get too excited about budgeting for a picture-perfect home, consider the unexpected costs. They can increase the bill much more than you imagine. Hidden costs include property taxes, HOA fees, homeowners insurance, and maintenance expenses.
Planning for them can save you from unwanted last-minute hassles. You don’t want to disrupt your lifestyle to pay off the monthly mortgage due to these extras.
Don’t forget about the future
Another tip to decide on a realistic home-buying budget is to think about the future. You cannot be too sure about life moving smoothly because it may throw you a curveball out of the blue.
Maybe you will lose your job or get into an accident. Make sure your budget has room for such unexpected changes. Save for retirement, plan for emergencies, and keep a cushion for rainy days. Thinking about the future gives you an edge on all these fronts.
Creating a realistic budget for buying a new home is not rocket science. All you need to do is be frugal, sensible, and far-sighted to determine a comfortable amount for your down payment and monthly installments. These simple tips can help you with both, so pay attention to them and win the home-buying game.
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