Setting a budget to purchase a property is an important decision. Ideally this should be considered a prerequisite to actually attending viewings and closing on a home. Calculating how much you can afford or wish to spend each month and then translating that into an acceptable mortgage amount is a crucial step but reality can settle in quite rapidly. Step across a few home thresholds and your expectations may not match your budget.
Individuals in this scenario are not alone in this conundrum nor will they be the last to face it. Normally there are three options available to homebuyers that need to be considered before proceeding with a decision. Each of these options are conveniently highlighted below to assist in weighing each potential avenue and ultimately to culminate in a favorable result without breaking the bank. In the end, remember that you’re buying a new home – this is supposed to be fun!
How large of a margin is it really?
The first option is fairly straight forward – how large is the difference between the current budget and the anticipated sale price? The delta between these two numbers is obviously quantifiable but the assessment of the amount is definitely subjective. A thousand dollar difference is a significant difference to some individuals while larger amounts may be easier to handle for others.
The purpose here is to assess the additional amount and question if you’re willing to relinquish more money. A key point to remember here is the assumptions made while creating your budget. If you budgeted for the maximum payment that’s affordable per month, then do your wallet a favor and don’t throw more money into pot. However, if you provided some additional room in the budget, perform a cost-benefit analysis on incorporating this additional amount into the offer.
Consider different home layouts
Reality has a knack for subduing personal expectations when purchasing properties. Yes, the home with three bedrooms for family visits, a swimming pool for outdoor parties, a garage for working on the automobile, and a large backyard for the dog to run around in sounds appealing. Who doesn’t want that lifestyle?
The point is that lifestyle comes at a cost that oftentimes may not be affordable at your presen1t moment in life. Instead of searching for the million dollar dream home, consider being flexible in your desires to create flexibility in the budget. Create a list of “must haves” and “wants” to assess each property on its own merit and to ensure it remains within (or close) to the budget.
Stick to your guns and keep searching
The final option is initially the easiest decision to make – submit an offer at your current budget and then leave the decision up to the process. If the present owners aren’t interested, the decision has been made for you. On the other hand, if the owner is interested you can attempt to negotiate to a reasonable amount.
When searching for a future home, the name of the game is patience. A homebuyer must be willing to view multiple properties and walk away from each property if it doesn’t fit the requirements (i.e. “must have” list). Remembering this key advice during viewings will help avoid poor financial decisions.