How Much House Is Too Much House: Effectively Choosing A House Within Your Means

Purchasing a house is an exciting time in anyone’s life, and it’s especially so for the first-time homebuyer. Everyone has their own idea of their “dream home.” However, this vision seldom includes the financial responsibilities that come with owning such a house. The first few days after a new buyer enters the housing market is usually when reality truly kicks in. They realize that a big house in a new neighborhood comes with big responsibilities, including a mortgage.

Whether you’re buying for the first time or just moving to the other end of town, there are many factors to consider when purchasing a home. It’s understandable to want to move into the house of your dreams right away, but it’s important to take a step back and ask yourself some questions: Will I be able to afford the mortgage payment with my current income? If so, will I be able to save enough for retirement? Will I still have the resources to go out to eat or on vacation once in a while? Unfortunately, homebuyers don’t always ask themselves these questions, and their dream house becomes more of a financial burden than an asset.

Fortunately, a good mortgage lender can help to answer the critical financial questions associated with searching for a new home before you even begin the process. In northeastern North Dakota, for example, lenders at First United Bank take extra time to sit down with potential homebuyers to determine an affordable price range based on their unique lifestyles.

Determining A Budget

Even if you are a seasoned homeowner, yearly income plays a large role in the size of house you are able to buy. For example, a young professional might be able to afford a larger mortgage than an older, more experienced worker who earns less each month. It all depends on your personal situation. While choosing which price range is best, it’s also important to consider the debts you already have, including student loans, car payments, credit card payments, child support, etc. Don’t forget that you also need to put something aside for retirement. Lenders take all these factors into consideration when determining the size of a home loan that you are qualified for.

Purchasing Within Your Means

Contrary to popular belief, you don’t always have to buy at the top of your projected budget. Even if purchasing at the top end of your budget allows you to obtain the home of your dreams, is it the right time to do so? It wouldn’t be much fun to have the house of your dreams without the finances to leave it for a weekend. For example, purposely spending 25% less than your maximum budget can provide you with extra financial freedom and peace of mind in the long run. Plus, it can allow you to set more money aside for things like retirement or your children’s education.

Choosing The Right Mortgage

Once you decide to purchase a home, it’s also time to consider the mortgage loan itself. In the United States, the two most common mortgage lengths are 15 years and 30 years. Financial experts often suggest a 15-year term when it is possible, but for many homebuyers, the higher payments (you are paying the loan off faster) are just not an option. This is especially true if the house you are looking to buy is at the high end of your budget. If you are in that position, ask yourself this: would you rather have the largest house possible and pay it off in 30 years or a more modest option and pay it off in 15?

“Decisions are so much easier to make when you find a lender who really understands your situation,” says Melissa Moen of First United Bank. “They’ll work with you to put together a mortgage loan that best fits your current budget, your future plans and your personal approach toward debt.”

Don’t jump into the housing market with a blindfold on. Choose a reputable institution like First United Bank. They will provide a clear vision of the housing market and personally work with you to determine a smart and financially sensible price range.