Can You Really Afford That New Home?

 Posted on March 28, 2022 in Real Estate

If you are currently on the hunt for your next home—and possibly your forever home—you are not alone. Since roughly the beginning of the COVID-19 health crisis, home prices have been on the rise, and the market has been historically hot. Experts expect the market to come back closer to normal over the next year or so, but there are no indicators that prices are coming down anytime soon.

With this in mind, you need to make sure that you fully understand what you are getting into when you submit a bid on a new home. As excited as you might be to start your life’s next chapter, it is critical to know that you can afford the price tag that comes along with it.

Working With Your Lender

The bank or financial institution that ultimately issues your mortgage will largely be responsible for establishing what your budget will need to be for your next home. Your lender will determine your loan amount, term, and interest rate based on a number of variables, including your credit score, tax obligations, and other details. It is not uncommon, however, for a lender to approve a mortgage that the borrower cannot reasonably afford. In fact, these types of approvals were among the primary reasons for the housing market crash in the late ‘00s.

One of the best things you can do for yourself and your family is to perform your own calculations regarding the loan amount, term, and interest rate that will suit your financial situation. You might also consider having your calculations reviewed by a qualified financial professional. If your lender offers you a mortgage that is in line with your approved calculations, you can feel better about accepting it. However, if your lender offers you more than you expected, be wary about agreeing too quickly. Before signing anything, be certain that you will not be stretching yourself too thin.

Costs of Homeownership

Of course, your mortgage payments are not the only home-related financial obligation you will be taking on when you buy a new home. You will also be responsible for maintenance expenses, property taxes, homeowners’ insurance, and utilities, among many other costs. This does not even account for any updates, remodels, or improvement projects you have in mind for your new home. If your mortgage and basic living expenses will leave you with nothing for these types of considerations, you might be getting in over your head right from the start.

Speak With a Libertyville Real Estate Attorney

If you are ready to buy a home, it is in your best interest to arrange a free consultation with an experienced Lake County residential real estate lawyer. Your lawyer can help you understand all of the costs associated with buying and owning a home in the market in which you are looking. Call 847-549-0000 for an appointment at Newland & Newland, LLP today.

Sources:

https://fortune.com/2022/01/04/great-deceleration-housing-price-appreciation-will-slow/

https://www.nerdwallet.com/article/mortgages/first-time-home-buyer-mistakes-that-are-easy-to-avoid