Buying What You Can Afford
January 24, 2025 | Posted by: Sherry Corbitt
As rates and the housing market continue to rise, many homebuyers question what they can realistically afford. Not only have home-buying prices gone up, yet everyday living has as well. So for many, especially those buying for the first time, it can be challenging to buy anything right now. Yet waiting may not be the best option either, since the housing market may take a while to cool down. Although your home buying situation may seem impossible, there are ways that you can afford a house in 2022. We will dive into the primary and secondary factors when purchasing a home.
Main Factors
When planning on purchasing a house, many buyers make a common mistake by putting too much focus ahead of what is most important. Unfortunately, this typically affects many homebuyers and will impact the purchase itself. Therefore, when you first decide on buying, you need to examine the main factors. This will include a down payment and closing costs. These are the two most expensive elements in the purchasing process and the two most essential when trying to get a mortgage.
Down Payment
Most purchasers tend to save 20% of their purchase price for a down payment. There, of course, are alternative amounts, such as 5%, when saving a down payment for a mortgage. Yet, with the market right now, many lenders are looking for buyers who can put 20% down. The key to saving a proper down payment, no matter what percentage, is knowing approximately how much your purchase will cost. You need to roughly know how much it will cost to get your down payment at the correct percentage you want. If you do not do this ahead of time, you will be presented with this issue later on.
Closing Costs
This can be an overlooked cost during a mortgage. Many homebuyers, especially first-time buyers, are mistaken about how much closing costs can be. Most lenders charge a 1% closing fee of the mortgage price. Depending on your lender and type, this may be even higher. As a buyer, you need to expect to pay anywhere between $2000 to over $10,000. If you are not prepared for these closing cost requirements before the buying process, you will not be when the time comes to pay. Ensure that you put aside some savings for your closing costs. Roughly know how much your house will cost, and speak with a mortgage broker to determine how much your closing costs would be. This can allow you to efficiently save and ensure that you have enough for all of the closing costs.
Secondary Factors
After focusing on the main factors, you will want to go through some other important factors that follow after. Two main secondary facors should inlcude choosing a house and selecting a broker.
Choosing a House in Your Price Range
After focusing on saving for your down payment and closing costs, you will want to begin your buying process by looking at houses. This step can stumble some buyers since they focus too much on the house and not the price. There are many situations where people find a house that they love and find out that it is too expensive after they begin their purchase process. This can be a huge let down, especially if you were set on buying it. To avoid being in a situation like this, start looking at houses in your price range. By doing this, you will know how much the house is from the start and will not be shocked with any isues later in the buying process.
Selecting a Broker
After deciding which house you want to buy, you will need to decide which mortgage broker you want to use. Although using a broker is not necessary for a purchase, there are many more benefits to using one. Start by searching for brokers in your area and meeting with potentials. If you know a family member or a friend who recently purchased, ask them who they used and how their experience was. Getting a broker through a reference can be good, since you may have a better experience and even get a better price offer. Of course, you want to choose a broker that will be able to meet your needs and who ensures that your purchase closes successfully.
Purchasing today can undoubtedly be extremely expensive. However, considering the main and secondary factors before and during the mortgage process will help you to plan.
If you have any questions about what you can afford, please reach out to me!
Sherry Corbitt, Mortgage Broker
Sources
-Martin, Erik. J. (2022). Creative Strategies to Buy a House in 2022. The Mortgage Reports. Retrieved from https://themortgagereports.com/87819/creative-strategies-to-buy-a-house
