In purchasing a home, budgeting is more important than ever. We know it’s easier said than done because a house is likely to be the most expensive buy you’ll ever make.
It’s exciting and you might even dream of wanting a huge bedroom, a wide landscape with a gazebo, and even a walk-in closet. However, it’s also worth noting that besides buying a house being so costly, owning one is more expensive.
For that, you’ll need a strict budget based on long-term financial goals that can still score you a home without experiencing buyer’s remorse.
It takes sacrifice and discipline to make the best financial move, considering that banks now require at least a 10% deposit, legal fees, energy performance certificates, and other additional costs.
We’re here to debunk the idea that, “the more you buy, the more appreciation you will see over time.” Here are a few ways you can stay frugal when you’re planning to purchase a house.
Analyze current financials and get pre-qualified for a mortgage
Before you get too enthusiastic about all the planning, you need to know where to start—and that is by your current financials. By analyzing your current expenses, savings, and other finances, you can examine what your financial picture looks like. Evaluate how much you are spending every month in your current home and you can finally plan a realistic budget in buying a new one.
After knowing what you can actually afford, it’s always best to get pre-qualified for a mortgage so you’ll know how much you can get approved for. As a pre-qualified buyer, you’re more familiar about financial information, which attracts more real estate sellers and gives you a better chance of getting a loan approved.
Set a target
When you’re finally pre-approved for a mortgage, start doing your research and calculating prices. Using a mortgage calculator, you can be provided with a glimpse of estimated amounts. Remember that the bigger deposit you can raise, the better mortgage deal you can get. Set an amount you want to achieve and work out how much you need to save each year to get there.
Another key to proper home buying budget is not only to save up for the down payment, but also cash reserves. Take note of home owner’s association due, lawn services, and utility payments. With those in mind, you’ll finally be able to separate houses with needed amenities from merely wanted ones.
To save up, set up a separate account for your savings so you will never be tempted to use them for other purposes, like a car, travel, or shopping. Sacrifice a little bit and cut down your outgoings so you can attain the house goal you’ve been dreaming of.
Never compete with other buyers
By that, we mean never compare yourself to someone else and avoid the bidding war. If your friend’s getting a $300k house, don’t make it a reason to change your mind and look for a more expensive one. Again, sticking to the budget takes discipline. It’s a nasty cycle to fall into but you have to take note that a house is not just an expensive handbag which you can impulsively purchase and recover from.
Sticking to an affordable yet comfy house with all the needed amenities will get you a lot of benefits such as investing on retirement funds and college education of your kids. Buying a house that’s unnecessarily expensive gives you fewer dollars to sock away for your family’s future.
Furthermore, avoid increasing your offer and getting into bidding wars that are against your proposed budget. These competitions can really get you out of hand. Resist the urge to exceed your limit, walk away, and look for other houses once you get caught in frenzy. After all, it’s only a matter of time before the right house comes along.