Thinking about buying a home? Let's talk about your budget.

Considering buying a home? Consider your budget.
In this blog series we have been talking about the items in your timeline to purchase a home. The last post we talked about reviewing your credit report and what that score might mean for you when you are working to purchase a home. Hopefully you’ve had time to look at your credit report and if you found items you wanted to improve or needed to correct you have started to work on them. In this blog post we are going to talk about some of the costs you will want to think about before you head out to look at houses.

After you have reviewed your credit report and are content with the score you will want to speak with your lender. Your lender will be able to tell you what you qualify for in a home loan (we all know that, right?). They will also be able to tell you what your monthly payments can possibly look like. These monthly payments can vary widely depending on how much of a down payment you plan to make, what type of loan you are looking for (Conventional, Veterans, FHA, etc.) as well as the rate you qualify for (affected directly by your credit history, this is why you want to check that first). You may qualify for a large loan amount but you may not be comfortable with the monthly payments associated with a large loan amount.  All of these things will affect the timing of your home purchase, the location and what kinds of homes you will want to consider.

(Below is an example of how much home one could afford with a $1500 monthly mortgage payment. It shows how the home price is affected both by down payment amount and interest rate.)
When you start to look at homes (admittedly the fun & exciting part of any home search) you will want to understand home values in the area you are looking to purchase. The price per square foot can be vastly different based on neighborhood, city (even if the cities are very close), finishes, lot size or even price point. In this area we can see a higher price per square foot placed on a home that is under $200,000 even without upgraded finishes, this is because our area’s inventory of these homes is fairly low. Your Realtor will help you to understand what an appropriate price per square foot for a home meeting your specifications should be. This will also help you decide on an offering price on a home, if the offered price is above the appraisal value it may cause problems with the lender and prevent closing.
You will also want to understand what “up-front” costs will be involved in your home purchase. These additional costs can come as a surprise to many. When the offer is placed there is an Option Fee (paid immediately to the seller) and Earnest money (held by the title company) - these fees will vary by the price of the home. You will want to know what you need to bring to the closing table; what closing costs will be your responsibility vs. what the seller will be taking care of. Many of these items can be negotiated in the contract but there will usually be a financial responsibility that is expected at closing.


Whether you’re spending $100,000 or $1,000,000 on your home purchase it is a big investment. Being aware of all of these things is essential to you being able to achieve the dream of home, property or investment property ownership. I would love the opportunity to be a resource for you on this process. Give me a call - I am here to help!

Michelle Peacock, Realtor®
TM5 Properties
michelle@tm5properties.com

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