Your budget and rent with option to buy
Buying a home is likely to be the most expensive purchase you make. And if you’ve waited a long time for this day to come, you’ve undoubtedly thought about the features you want; maybe you’re craving a large master bedroom with walk-in closets or maybe a gourmet kitchen with granite countertops.
While you don’t want to skimp on the comforts you love, adding too many can add to the cost and wipe out your budget. Instead of thinking about it right now, start thinking about your long-term financial goals and assessing your budget before you buy, you can get the home you want without experiencing buyer’s remorse. The only thing to remember is that you can add all the things you love to your home and reap the benefits when the price appreciates the most.
When you are pre-approved for a rent-to-own, we will determine how much we think you can afford to spend on a home without there being a situation where you have to do multiple jobs just to make your payments. As in many cases, we will provide an upper limit to the budget, but do not assume that the final upper number provided is the amount you should spend. The upper end of the budget is based on the assumption that you will have paid off or reduced many of your debts and that your current employment situation will remain the same, if not improve.
1. Confirm your quote online
Do you want to know what you can pay on your own? Go online and use a mortgage calculator – After entering the sale price, loan term, and interest rate, the calculator calculates your monthly payment, including homeowners insurance, property taxes, and private mortgage insurance. This can give you a good estimate of how much you can afford based on the sale price, but don’t stop there. Find out if there are other expenses you will need to budget for after buying a home.
For example, will you have to pay the monthly fee owed by the homeowners association? Are you going to need to hire a lawn or pest service? Are your utilities likely to increase after your move? These costs can really add up and consume your monthly budget, and if you are not willing to sacrifice your current lifestyle for the sake of a new home, it would be wise to choose a less expensive home with a lower price that will result in lower monthly payments. . I suggest creating a priority list for the “must-haves” you would like to have in a home. List the top 5-10 things in order of priority that you cannot do without, down to those things that would be nice to have, but are not necessary. By doing this, you will be able to focus on the type of home you want faster and you will be in a better position to stay within your budget when you start looking for homes.
2. Check your real estate agent
I have only had positive experiences with the real estate agents we have worked with, but not everyone is so lucky. When we work with a real estate agent, we establish what the budget is for you and the real estate agent. It is important that you commit to the real estate agent to stay within the established budget. Good agents respect your finances and only show you the houses you can afford.
With that said, some agents may try to go the extra mile and recommend properties outside of their price range. We will be a check and balance and we will not allow this to happen, but you must also be firm and stand firm.
3. Avoid being like the neighbors
It is very easy to fall into the cycle of “compare and despair”. If you’re working on a $ 250,000 budget and your best friend just bought a $ 300,000 home, you may find yourself comparing your home options and amenities to his or her.
This is an unpleasant cycle to fall into, especially when it comes to buying a home. A house is not a pair of shoes or an expensive purse; If you overspend when buying a home, it is not easy to recover from the mistake.
Instead of obsessing over the fact that your friend bought a home with an outdoor kitchen, congratulate him and then get excited about what your $ 250,000 budget can do for you. Maybe you have four bedrooms instead of two, or you will have a gas oven instead of an electric one. Then think about the ways you will benefit from staying within your budget, such as maintaining a healthy vacation or retirement fund, or starting a college education fund for your children.
4. Avoid bidding wars
Imagine this scenario: you find the perfect home, make a solid offer … and then your realtor calls to inform you that the seller has multiple offers to choose from. Competing with other buyers is not a picnic, and to win a bidding war, you often have to increase your bid. This is not necessarily bad, as long as you can stay within budget; however, bidding wars can quickly spiral out of control. As a general rule of thumb, we typically will NOT get into a bidding war, especially if you are artificially inflating the price of the house above what the market value actually is. Why? In a rent-to-own, an appreciation is added to the price of the home for each year it is in the program. That appreciation is usually built on the market value or the list price. If this is artificially higher than it should be, it could cause problems for you when you qualify for the mortgage on that home at the end of the rent-to-own term. The lender’s appraised value may not be there due to the inflated price set during the bidding war.
5. Bid on houses that are not for sale
Some buyers avoid homes that have been on the market for a long time, assuming there must be some hidden defect. But sometimes, the inability to sell a home is much simpler. For example, maybe you just have bad curb appeal or there is too much inventory in a particular market.
Therefore, it is important that you do not automatically dismiss a house just because it has been sitting for a long time. In any case, look for these houses. The seller is probably motivated and willing to lower the sale price to move the property. This is good news especially if you fall in love with a home that is a little higher than your budget, as you may be able to negotiate a purchase price that is lower and fits your budget.
Even if the seller is unwilling to lower the price, there are still more bargaining opportunities when a home has been on the market for months. For example, you may be able to request contingencies to replace old carpet or paint the exterior of the house. If you can identify the reason the property hasn’t sold, you can ask the seller to lower the sale price of the home or provide a cash allowance for the repair.
If you are still concerned about possible hidden defects, please state in your offer that the offer is subject to a satisfactory home inspection, which is a good idea no matter what. If your home inspection reveals problems, such as problems with the plumbing, electrical system, roof, appliances, or windows, you can ask the buyer to make the necessary repairs or you can remove your offer from the table.
Staying within budget when buying a home requires discipline, so you need to approach the buying process with care. Know what you are willing to spend and refuse to look at the houses listed above your budget. If you can’t find a suitable property after a few weeks or months, check your budget to see if you have room for maneuver. If not, wait, it’s only a matter of time before the right house arrives.