Am I Buying a House Out of my Budget?

by Ashley Wirgau

Congrats! You’ve finally found the house. Open floorplan. Walk-in closets. Beautifully landscaped gardens with an assortment of flowering annuals the realtor assures you require little to no actual maintenance. Everything is on the up and up – including the price tag. Yikes!

You knew you should have stuck to your guns and stayed below your “max-out amount” – but those closets, those gardens. You had to at least take a peek, right? But now that little peek might end up costing you big.

So, how does a hopeful house-hunter know when to just say “no” and keep looking? We’ve compiled a handful of questions to bring homebuyers with their heads in the clouds back down to reality. It’s time to get really honest with yourself and walk through each question, one by one, as you decide whether the property in question is your dream house or just an over-priced fantasy.

Can I actually make the mortgage payment?

Let’s start with the basics:  Can you even cover the monthly bill? It is easy to get swept up in the romance of it all. You can picture yourself hanging family photos, stocking the spacious pantry with your favorite staples, sitting in your “magically grows itself” garden – but can you envision your checkbook covering that hefty payment month after month? Our Ruoff mortgage calculator will provide a quick breakdown to help you determine whether or not the final amount is really within reach for you and your monthly budget. This handy online cheat sheet also allows you to plug in homeowner’s insurance and property taxes, so make sure to use real-life numbers here as you are making real-life decisions.

What about all the extras?

After you have figured out the final monthly cost of your mortgage, add in PMI (Private Mortgage Insurance) expenses if applicable. Depending on the neighborhood, HOA fees may also come into play. After you’ve tacked those on to the running total, kindly request past monthly utility bills on the property from your real estate agent to gauge these non-negotiable expenses. Finally, take a good look around the property and add in any necessary repairs that need to be completed immediately following the sale. These costs will add up quickly, and after the funds for the down payment leave your account, you might not have much left. When buying a house, it can be easy to get swept up in the excitement and forget about all the nickels and dimes and Benjamin Franklins needed to get to the end of each month, so don’t let the commotion overpower your common sense.

How does my budget look if something goes awry?

If you’ve made it to question #3, you’re on the right track. The mortgage payment and all the extras fit neatly inside your budget. That’s great, but what if six months down the road, you hit a hurdle? Job loss, health issues, divorce – all of these make-or-break problems seem to strike at the worst possible times. Can your finances handle it?  

Before you close the deal, take a long hard look at your savings account and emergency fund. When taking on the pressures (and pleasures) of a new home, it is essential that you feel confident in your ability to tread water should anything unexpected come your way.

What does my gut say?

This next question that you need to ask yourself is actually the most important:  How do you feel about it all deep down in the center of your stomach? There is a lot to be said about human intuition and its guiding force, and believe it or not, homebuying is no exception. If the decision is keeping you up at night, leaving you anxious or worried you won’t be able to handle the cost, this might not be the house for you. Trust your gut to tell you when something doesn’t feel right…and also when it does. If the numbers add up and the house just really “feels like home,” then go for it and don’t look back.

Where do I sign?

Woohoo! You made it through the tough questions, and now you get to ask the fun ones:  Where do I sign? When do we close? Who wants to come to my house-warming party? Buying a home doesn’t have to be high-pressure or stressful, and when you select a property that is truly within your budget, it really helps. Bypass the road to regret by (honestly) answering the quick questions above and make sure the next step you take is the one that gets you across the threshold to your awesome – and affordable – new home.

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