Buying a Home? Read this first!

The decision of owning a home is probably one of the happiest ones you can make, but it is likely one of the most stressful as well. Why? Because it’s a major investment, and going about it the wrong way can easily turn your dream into a nightmare if you don’t know how much home you can afford. Before fantasizing about granite countertops, walk-in closets, a garden with fountains, and white picket fences in that plush neighborhood, it is essential that you do the necessary research and preparation so that when you finally plunge into that big buy, there will be no regrets, just happy thoughts on how much you’ll love living in your new home.

The most crucial consideration when buying a home is making sure that after you go through with the purchase, you will continue to be able to pay all your bills on time. If you’re like many Americans who will need to buy a house on installment basis (that is using a mortgage), there are 3 basic questions you need to ask to know how much home you can afford.


How much mortgage are you qualified for?

Downpayment for a house in BillingsBefore going deep into your home-shopping venture, it is important to get a reasonable estimate of how much a lender is willing to risk giving you so you can buy your desired house. You might assume you can afford a $500,000 home because you have above-average income. A lender, however, will not easily make that conclusion based on your income alone. Other considerations will need to be put on the table too such as how much debt you have, how long you’ve been at your job, and what your credit score is. Of course, the better the figures are the better chances you have of getting approved for the loan amount you need.


How much down payment can you manage?

Keys to your new affordable home in Billings

The ideal down payment is at least 20% of the house price. If you make a down payment that’s less than 20%, you’ll be required to pay what’s referred to as PMI or Private Mortgage Insurance which serves as protection for the lender in case you are unable to make good on your loan. You’re off to a good start if you have enough savings to cover the ideal down payment price. However, it isn’t advisable to clean out your entire savings account for this as you might be left high and dry when unexpected circumstances arise.


How much home can you actually afford?

While the biggest considerations in determining the cost of your new home are the purchase price, down payment, and mortgage payments, this is just the beginning. If you haven’t been serious about budgeting, now’s the best time to sit down and take a long hard look at what has been going on with your finances. You have your income, and then there’s everything you spend it on such as food, transportation, utilities, personal items, property taxes, homeowner’s insurance, and maintenance costs. What’s left is supposed to be what you will use to pay for your mortgage.

Bills affect how much you can pay for a new house in BillingsIf the residual amount after paying for all your regular expenses is barely or just enough to cover your mortgage cost, you might not yet be ready for this big move. Keep in mind that it’s not just your mortgage payment you’ll have to add to your existing expenses. You’ll could have other upcoming expenses such as homeowner association dues or condo fees. There might be unexpected repair costs too. And there are closing costs as well.

The amount you can afford shouldn’t just be limited to your income minus your regular expenses and mortgage payment. It should also cover expected and unexpected additional expenses. Below this amount, you might have to consider opting for a lower-priced home. Alternatively, you can patiently wait a few more months for conditions to improve (e.g. increase in income, fewer expenses due to smarter spending habits) and the increased likelihood of being able to afford the home you really want.


Don’t Settle for a Home You Don’t Love

Here at Big Sky Homes, we have top-of-the-line homes at an affordable price. By offering Billings some of the most affordable housing options around, we make sure that you get a home that you love, with all the modern comforts, and your mortgage is kept to a minimum.

Start your home buying experience with us, you will be happy that you did! Come see us at 750 Parkway Lane right here in Billings.