Buying a house in Austin? The easy part is figuring out how much you can afford. The really hard part is sticking to your limit.
Capital Budget Strategies, LLC, Austin best Financial Coach, has many clients in financial stress because they purchased “too much” house. One client built a new house with a pool, then could not even afford to go to the movies because of the steep mortgage. They want to move, but would lose thousands of dollars. Yikes.
Besides the mortgage, most lenders will require you to pay home insurance, mortgage insurance and real estate taxes. Just a note, real estate taxes for a modest house in Central Austin are about $10,000 a year or $833 a month.
How to determine what you can afford? Easy as building a budget. I know, budgets scare some people. But without a budget, you have no idea where your money is going, where you can save and where you spend too much. But you need to figure out how much you spend per month before you can figure out how much you can afford on a mortgage. Sorry….
STEP #1: Make a Budget
Write down your “take home” pay – the total that is deposited into your account every payday. Then over a couple of weeks, figure out how much you spend on monthly expenses, such as groceries, gasoline, car loans, credit card payments, day care, school loans, parking, entertainment, etc. (Notice you left out rent and utilities).
Then add in money you should be saving for your long-term expenses, such as holiday gifts, Emergency Fund, tuition, medical care, car maintenance, pet care, etc. Add up all your expenses and subtract the total from your take home pay.
The result is the most you can afford for a mortgage and all the extras. Subtract a couple of hundred dollars (for safety) and provide to your Realtor as your max mortgage.
STEP #2: Work with a Realtor
Do not let your Realtor talk you into going over your budget. Remember, Realtors work for commission – the more YOU spend, the more THEY earn. If the house is over your budget – you cannot afford it and you will regret it. Just save up more cash and restart the search in a few months.
For $149, Capital Budget Strategies, LLC, Austin best Financial Coach, will help you determine your mortgage limit. Working together, we will first determine your Net Worth, analyze your spending, set up a Budget, an Emergency Fund and a Snowball Debt Repayment Plan. We will also review your bank accounts and introduce you to on-line banking.
Give us approximately 4 hours and enjoy a home you can afford!
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