Getting Pre-Approved | Types of Mortgages | How Much Can You Afford?
Your lender will provide you with a loan amount based on a number of factors – some of which will be refined once you choose the home or condo that is right for you. For example, if you choose a condo with a high monthly HOA amount or a property with access to waterfront that has a higher property tax amount, that might change the amount of money the lender will allow you to allocate to housing each month which will affect your overall loan amount.
However, just because the lender gives you an amount they will finance, that doesn’t mean the corresponding monthly payment is something you will be comfortable with.
Monitor your expenses for a couple of months. Then, based on your findings, develop a budget that truly reflects your lifestyle. Talk to your real estate professional who can provide insight into new home expenses and taxes. Then revise your budget. This will help you avoid becoming enamored with homes that are out of your price range.
Remember to consider for yourself those other expenses that may not be a part of your monthly payment to the lender, but will still eat into your monthly expenses:
| Expense | Fixed or does it change? |
| Principal and Interest | Fixed if it is a fixed-rate mortgage, fluctuates if adjustable-rate mortgage |
| Property Taxes | Changes |
| Homeowner Insurance | Changes |
| HOA Dues, if applicable | Changes |
| Additional local dues and fees such as with a shared well or road maintenance | Changes |
| Special assessments if in an HOA or condo association | Changes |
And of course, utility and maintenance fees change over time as well.
In fact, the above fees rarely go down, so it is important to think about your monthly costs now, plan for any emergency maintenance, and make sure you have a plan for the next five or ten years.
Don’t get uncomfortable with your expenses. Knowledge is power! Ask questions, learn what your monthly outlay will be, and make a great homeownership decision.
