Your home should be your own special oasis that not only meets your needs, but also fulfills all of the dreams you have for your space. But it can be difficult to determine how much you should actually spend on your dream home. To go into the process with a clear idea of your budget means that you won’t be tempted to stray away. It also means you have time to get creative with making the budget work for your vision. So when you do have that dream, what are some ways to determine your budget and make it work for you?
Write down your monthly expenses.
To really nail down your budget, it’s a great idea to write down or create a spreadsheet with all of your monthly expenses. Think about any current debts or loans you’re paying off, as well as food and utilities. Compare this with your monthly income, and see how much you’re left with. How does that compare to what your mortgage will be each month?
Get creative with your mortgage.
Don’t feel like you have to stick with a 30-year fixed rate mortgage. That’s not necessarily what will work best for every homeowner. Adjustable rate mortgages for five, seven or 10 years might work better if you plan to sell within 10 years.
Stick to the script.
A good rule of thumb is that your home should cost no more than 2.5 times your gross annual salary. The rate you pay each month will vary depending on your down payment and credit score, so it’s important to take all of that into account. Keep in mind that just because you can afford to buy something, doesn’t mean you need to.
How low can you go?
Before you settle on anything, negotiate the price. You never know what a seller’s situation is. They may be moving because of a job transfer or maybe they need to sell quickly because they’ve already bought elsewhere. They more motivated they are to sell, the more willing they’ll be to go down on the price. It never hurts to ask!
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