As you are shopping for a new home and choosing a mortgage, one of the questions you will need to answer at the start of the process is, “How much home can I afford?” Along with budgeting for your mortgage payments and other predictable costs, you need to also budget for the unexpected. Here are a few things to think about.
- Maintenance and repairs. Owning a home requires you to pay for its upkeep, unlike when you are renting. You are no doubt already aware that this means maintenance of your home and lawn on a regular basis, as well as the occasional repair. But it can be easy to underestimate how much you need to be able to pay in maintenance and repair costs over the long term. The general assumption is that every year, you will spend somewhere between 1-4% of your home’s value maintaining and repairing it. So make sure to plan accordingly.
- Insurance and utilities. Just as you know you will need to spend money on maintenance, you probably know you will need to pay for homeowner’s insurance and utilities. Depending on your down payment and loan type, you might also have to pay for mortgage insurance. The thing to keep in mind is that insurance and/or utilities can go up in price over time. What you are paying for everything from trash services to electricity ten years from now will likely be more than what you are paying for these services when you buy your house. Hopefully your income will also increase, but it is something to think about.
- Property taxes. Perhaps the biggest unwelcome surprise for some homeowners is a sudden and significant increase in property taxes. This can happen if a change in your neighborhood abruptly raises property values substantially. You might be able to predict situations like these if you study what is going on with local developments, and consider potential that might be tapped in the future. But in some cases, it may seem like it comes out of nowhere. Leaving some extra room in your budget for property tax increases can help soften the blow if you ever do run into this situation.
Find Out How Much Home You Can Afford
During your consultation, we can help you figure out how much home you can afford based on your financial scenario. We also can pre-approve you for a mortgage. You will be able to use the pre-approval letter to help you focus your search on homes within your budget, and it will tell sellers you are a serious buyer.
We can help you purchase a home or refinance in Missouri or 40 other states. To get started, please give us a call at (816) 631-9687.
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