If you’re in the market for a home, probably the very first step you’re going to take is determining your price range. And unless you’ve got a nice nest egg in the bank, that amount is going to come down to the monthly mortgage payment you can afford to make.
Or is it?
The mistake many homebuyers make - especially first-time buyers - is only taking the mortgage payment into consideration when deciding the price of the home they can afford. In reality, however, a lot of other expenses need to be factored into your monthly costs as a homeowner before you settle on the price range. So in addition to your monthly mortgage payment, make sure to calculate these other costs and add them into your budget before you start shopping for your dream home:
- Utilities: The bigger the house, the more you will spend on electric, heat, internet, etc; make sure you have an idea of these costs based on square footage. Your real estate agent should be able to provide you with these estimates
-Taxes: Property taxes vary among cities, counties and states, so hone up on these differences and factor them into how much home you can afford based on where you want to live.
- Insurance: Do some research and get a realistic price range on what homeowners insurance is going to cost you for the type of home and properties you’re looking at.
- Repairs and maintenance: Are you looking at older homes or new construction? The former may save you money on the purchase price, but you’ll need to increase your budget for repairs and maintenance in the short and long term.
- Landscaping: If a big yard is one of your must-haves, make sure you’re budgeting for landscaping costs, or are ready, willing and able to do the work yourself.
- Furniture and design: Is your heart set on furnishing and designing the interior of your home to perfection? Or are you willing to live with a slightly outdated kitchen and your old apartment furniture for a few years while you slowly chip away at improvements? Make this decision up front as it will factor into how much you can afford on the purchase price.
While taking the above into consideration may mean looking for a home in a lower price range, you’ll be better off in the long-run - living in a home you can comfortably afford and enjoy.