These days, mortgages make home buying a more affordable investment. Instead of having to save hundreds of dollars to buy your own home, you can simply apply for a loan to make your home purchase a reality. But even with such a bargain, many still fall into the housing debt traps.
If you plan on buying a house in Utah this year, it pays to be careful so that you won’t fall into great debt just to acquire a new home. Here are some steps that you can take to keep yourself safe from having too much debt when buying a house:
Set realistic expectations
All homebuyers want to buy a beautiful house. But if you plan to buy a move-in ready home, then you might have a hard time with all your requirements, especially if you are very specific when it comes to the location. You may find the exact home you are dreaming of, but it can be a little bit way over your budget. So make sure that you manage your expectations.
Know how much you can and can’t afford
It can be a tricky task to check just how much you can comfortably afford for a monthly mortgage. But one good way is to use a reliable mortgage payment calculator. You just need to input certain variables for you to know roughly how much the monthly mortgage payment will be. Next, you need to check your total monthly expenses. This allows you to get a clearer picture of how much you can afford each month.
Save up for a bigger down payment
Most home loans require a 20% down payment or less. But some mortgages won’t require you any down payment at all. While this can be an attractive offer, remember that a bigger down payment means lower monthly payment. You can also enjoy lower interest rates and even cut your loan term in some cases. So as much as possible, save up for a bigger down payment.
Save up for a cash reserve
Being a homeowner comes with many perks and a lot of responsibilities. There are many expenses to think about – not just your mortgage. Once you add up your taxes, home maintenance, and other costs, your expenses can skyrocket. So make sure that you also save up for a cash reserve. You can save up to at least six months’ worth of your monthly expenses (your monthly mortgage payments included). This way, you can still have enough money to cover for emergencies or unexpected expenses.
Shop for mortgages and lenders
One big no-no is saying yes to the first mortgage offer you receive. Remember that no two mortgage lenders are the same. Shop for mortgages and find one that can help you buy a house that you can afford. If a lender tells you that you can go over the budget and tries to make you sign up for a bigger loan, then it is best to take your business elsewhere.
Shopping for a home can be an exciting adventure. But you don’t want to end up being house poor due to avoidable mistakes. Keep this list in mind, and you can finally acquire a home without putting yourself at a greater financial risk.