I’ll admit, I was ill prepared going into buying a house for the first time. We spent a lot of time thinking about cities we were interested in and our must have house features, but finance? I’d only really skimmed the surface. I knew what our lender would approve us for, but hadn’t thought enough about the practicality of what we wanted to be spending
The offer you might have to go up to in order to win the bid in today’s market could have some unexpected added costs. Right now, 2/3 of offers are in competition with others. More buyers are buying in all cash. Those who can’t take that approach are taking all sorts of steps to try to make themselves standout, including waiving things like appraisal and inspection contingencies. These risky moves might get you the home, but at what cost to you?
Home purchase prices are up 13.2% over the last year, a figure that’s expected to grow even more into 2022. But just because buyers are willing to pay more to get what they want right now doesn’t mean lenders are keeping to the same level. If you’re willing to go beyond the appraisal to keep up with the high level of offers that are currently happening, that doesn’t necessarily mean the bank is going to want to do so as well. Your lender may require you to put even more money down, so that’s something to be prepared for.
When thinking about the purchase price you’re targeting, there are a couple of things you should know.
- How much will your bank approve you to take out a loan for?
- How much do you actually want to pay per month for your mortgage? (Note, this amount will not just be your mortgage but will include your insurance / escrow.)
More than likely, you’ll be approved for more by the bank than you really want to be spending. Knowing what you want to spend will allow you to be able to react quickly when you find something that first your needs without taking on more debt than you’re comfortable with.
One great site I’ve found to help you quickly go through a lot of the important numbers so you’re prepared going in is Mortgagecalculators.info. Their Advanced Mortgage Calculator helps you go into that monthly payment in more detail and see what you’re looking at spending from a number of angles. It’ll then output a bunch of different data points for you, including monthly and annual amortizations along with repayment charts.
Mortgagecalculators.info also has their Payment Range Calculator that lets you see the impact paying down extra per month can have over time. I’ll confess we did this for a bit and didn’t look into how much of an impact it would have over time. Spoiler alert: it makes a huge difference! Smart to not only run the numbers when you buy your home but as you consider financial moves you can make along the way.
What other helpful sites or tips have you discovered along the way? Drop them in the comments!
Disclosure: I’m not a financial advisor and none of the above should be viewed as formal financial advice. Please use this info as food for thought as you start your own process and build out your network of professionals in the field to help you through the home search process.
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