Buying a house is a stressful activity. That makes sense because it’s a large investment and it becomes a big part of your house. A home, after all, is where the heart is. And you can’t heart a house that is not right. According to a survey conducted by Owners.com, 72 percent of home buyers are stressed out at the prospect of buying a house. The most stressful part of the act is the financial aspect.
Finding ways to earn more money is always stressful. It seems like no one could have nearly enough money. So the prospect of putting out a lot of money is a big deal. However, when it comes to homes, a lot of people are actually willing to pay more for the right house that costs up to $38,000. The same survey stated that more than half of Americans (55%) are willing to go beyond their budget in order to purchase a house.
Therein lies the danger. If you spend more than the budget you have prepared for a house, what will that do to your overall budget? Just because you are buying a house it doesn’t mean that the other expenses stop. The bills will continue to come, your tummy will still grumble and there are still places to go. Overspending by close to $40,000 means a distortion of your daily, weekly, and monthly budget. That amount can already last for about half a year.
It’s no secret that money can buy you your dream house. That’s why more people don’t mind going over the budget. But it’s practical to stay within the budget. There’s a reason why you prepare a budget. So sticking to it should be of utmost importance. Here are some tips to stick to your budget when you buy a house.
Stick to a science
There is a rule of thumb in buying a house. The amount of house you can afford is your monthly income multiplied by three or four. According to the census bureau, the average income for people with a college degree is around $43,000 annually. That means that if you want to buy a house, it should be around $160,000. Stick to this budget. Why? If you go overboard, the mortgage amortizations might be too high for your own good. But you can figure it out. If you think you can afford the mortgage payments for a higher cost for the house then that’s well and good.
The danger of not sticking to a budget is that you might be spending more than you are earning. You could be in real trouble if this happens. If you could not cope with the expenses, chances are you are going to take out a loan or max out all of your credit cards. This would put you in a bigger debt because of the interests. So stick to your budget; stick to the rule of thumb.
Get an advice from someone you can trust
First things first: You cannot trust real estate brokers in all aspects of home buying. You can trust real estate agents to give you the best-looking house at a reasonable price. But if you want an honest advice, get a family member to tell you the truth about houses and their appropriate prices. The problem here is whether that family member actually has the authority to speak about real estate.
Find a trusted financial planner that can help you with real estate business. There are so many important things that need to be considered when purchasing a house. The most important thing, of course, is the price. But aside from that, there is the location that you need to consider. A good location is a place where all the important institutions and services are in close proximity: hospital, school, malls, restaurants, some government offices, etc. A great financial planner will consider these in giving you real estate advice because the location has some monetary effect in the long run.
Get a negotiator
Chances are the price introduced in the market is negotiable. So you have to take it to the negotiating table. If you can do it on your own, that is okay. But sometimes you need someone who is an expert on this matter. Ask someone who can help you lower the asking price for a real estate. If that person is for hire, just make sure that his or her fee is lower than the discount you will get from the seller of the house.
Weigh mortgage options
Unless you are a millionaire, chances are you’re going to pay for the mortgage to own the house. There are alternatives to mortgage. You can either choose to have a lower monthly amortization for a longer period of time or a higher monthly fee for a shorter time. Everyone wants to pay off debts as soon as possible. But you have to evaluate if you can live a relaxed life with your monthly amortization, considering that life goes on even if you get a mortgage.
The shorter years you can pay your mortgage is usually around 10 to 15 years. The usual term is around 20 to 30 years. If you really want to go for the higher mortgage at a shorter period of time, you can try to make adjustments. People prefer to pay off mortgages in the shortest time possible because they will pay for the interest every month the mortgage is unpaid.
Instead of eating our at fancy restaurants every week, you just try to enjoy a home-cooked meal. That can save you a lot of money that can be put in your housing expense. You have to keep in mind, though, that buying a house is a long-term solution. This means that if you have to quit eating at restaurants, it’s going to be a long-term sacrifice, too.
Find ways to increase your monthly income
If you prefer to buy a house that is beyond your budget, you should earn extra income. If you don’t follow the monetary science of buying a house, you should at least stick to the rule of thumb when it comes to expenses: spend less than your actual earning.
If you find yourself in the negative, it’s about time to earn money on the side. There are so many ways to earn money without spending a lot of time and effort. You can enroll your vehicle for Uber or your house for Airbnb. You can also de-clutter your house and sell the stuff you don’t need.
You may also invest some of your savings. But make sure you get the help of a financial advisor when you invest money. Remember that if you are buying a house, a large sum of money is involved. You can’t play with what extra money you have because this could be your cushion in case financial troubles arise. Don’t invest in risky businesses. Find an activity that will give you sure earnings even if the payoff is not as substantial as those in the risky area.
Track your finances
In order to stay on the budget and be on track in your regular expenses, you have to track your finances. Even if you are just buying a loaf of bread, it should be in the ledger so you can determine how much money you are spending every day, every week, and every month. Or in this technology dependent time, you can download apps that can help you track your expenses. Among the more dependable apps are My Expense Tracker, Mint, Toshi Finance and Visual Budget.
Another great reason to tracking the budget is that it will inspire you to always make things better. Since you are always looking at the numbers, you are expected to find ways to improve the numbers and make things better for you.
Choose your home wisely
When talking about budgeting for a home, it doesn’t just mean you save up and spend on the actual purchase of a house. It’s more than that. If you want to draw the real budget for a home, you must consider everything. That would include transportation. How much gas are you going to spend every day, every week and every month to commute from the house you intend to purchase to your place of work? When you have identified that estimate, consider if this makes the house way more expensive than it actually is. For all you know, the expensive house near your office will actually come out cheaper in the long run.
There is a reason why “budget” was invented and innovated on because this is a tool that can help people remain financially afloat. So if you have budget, going overboard makes it useless. Follow the budget you have painstakingly and intellectually made to keep things in order and prevent you from taking out unnecessary loans that could drown you in debt.
So upon budgeting, if you think you are not financially mature to invest on a house, you better not risk it. As mentioned earlier, real estate is a long-term commitment. If you flake on this commitment even just half-way through, expect a major financial loss on your side. There’s a good thing to all of this, though. According to the website The Street, 90% of Americans successfully buy a house within their lifetime. That’s a great figure-and promising to boot.