You fell in love with a house at first sight, and your bank approved the loan but before you sign on the dotted line, Consumer Reports says make sure your eyes aren’t bigger than your bank account.
Chiara Norbitz and her husband Mike Grubiak just bought their first home.
When trying to determine their price range, they had two goals: keep their monthly housing costs below what they’d been paying for rent, and make sure they had enough leftover to cover all their other expenses...and then some. Norbitz says, “we tried to break it into a pie where we were at least saving a certian amount of money every month.”
Their bank pre-approved them for a certain number, but Consumer Reports Lauren Lyons Cole says that number can be deceiving. Lenders look at how much they think you can pay them each month.
Cole says, “you need to have money in case the air confitioner breaks or you need to replace the roof. Owning a home is very cost intensive so keeping your mortgage payments as low as possible will help you afford everything else that goes with it.”
According to a recent a recent Bankrate report, 80-percent of current homeowners say their current mortgage payments make it difficult for them to save money and parents in particular have a hard time juggling their competing financial priorities.
In the end, Grubiak and his wife found a home they love for less than the bank was willing to loan them, leaving them enough room in their budget to start saving for the next big thing.
Having trouble calculating a number you can live with? Consumer Reports says working with a financial planner or a third party you trust could be a good move.