When you’re in the market for a new home, you may find yourself looking at expensive houses with a lot of square footage and extra amenities that you hadn’t initially thought of. And while it’s perfectly normal to have a dream home that you’d love to own, this home just isn’t a reality for many people. Rather than this option, most people have to either really stretch their budgets or limit their must-haves in order to get into a home they can enjoy without breaking the bank. So to help you ensure that you’re in a good situation financially when you buy a new home, here are three ways you can prepare to not spend more than you can afford on your monthly mortgage payment.
Use A Mortgage Calculator
If you’re not sure how much you can realistically afford to spend on a home, one of the first things you should look into is a mortgage calculator. There are plenty of apps or websites out there that can help you figure out what you’ll be paying for certain fees or utilities and how those amounts will affect your monthly income. According to BankRate.com, a mortgage calculator can show you how much you’ll have to pay for things like taxes, insurance, interest, and more when you buy a home for a certain price. So if you know at least some of these variables for yourself, you’ll be able to get a good idea of how much you can comfortably spend on a home.
Know What Percentage of Your Income Should Go Toward Home Costs
To be safe financially, you’ll want to ensure that you’re not paying too much of your monthly income toward your home costs. While this number can vary depending on how much risk you’re comfortable with regarding your finances, David Weliver, a contributor to Money Under 30, recommends sticking somewhere between 25 and 35 percent of your pretax income. By ensuring that your home isn’t costing you more than this percentage of your income, you can rest easy knowing that you’ll likely always have enough money to cover your monthly payments and other necessities.
Save For A Larger Down Payment
To save more money in the long run, one strategy you can try is to put down more money as part of your down payment. According to AJ Smith, a contributor to Credit.com, a larger down payment means you’ll get easier approval for your home loan, you’ll have a lower monthly mortgage payment, you’ll pay less interest, and you won’t need private mortgage insurance. Knowing all of these advantages, if you have the time to spare, you may want to consider saving up as much as you can for your down payment.
If you’re worried about how you’ll be able to find the right price for a home, use the tips mentioned above to help you do just that.