Buying your own home, especially if you’re a first time buyer, is going to be an incredibly expensive and exciting thing to do. You’ll finally have a place to call your own, and you’ll be able to decorate and furnish and garden in just the way you like!
However, putting together a budget for a big life move like this is going to be one of the hardest things you’ve ever done. There are a lot of mistakes that can be made, and working out what you can and can’t afford can get pretty complicated – even having banks and loan companies weighing in doesn’t help!
But if you’ve got your heart set on being a homeowner in the near future, and you’re sure you can manage it, you’ll need to ask some questions. If you’re not sure what the answers should look like, we’ve got pointers for you below.
Work Out the Numbers
Working out the numbers is the first main step in drawing up a house buying budget, simply because they’re all you have to work off. The housing market rises and falls every single day, and you have no idea whether or not that dream property down the road is going to stay at that relatively affordable price, so you need something more concrete to make use of.
As such, you need to think about your own numbers. Your gross income, your current expenses, what you would be able to afford in terms of mortgage repayments, etc. You’re also going to want to take into account the kind of savings/bank accounts you’re currently using – if you don’t have a long term investment ISA on your side, now might be a good time to set one up.
Once this is all put together, then consider outside funding sources, such as help from friends and family, and it’s a good idea to check the government website, in case there’s a grant you can apply for.
Look into Loan Options Ahead of Time
If you know you’re planning to buy a home of your own in the next 3 or 4 months, you’re going to want to look into mortgage options now, rather than after you’ve found the perfect property. Because when you’ve got a loan ahead of time, and you’re pre-approved to take it out, you’ll have much better luck in locking down your dream home dream.
Overall, getting pre-approved for a mortgage has a lot of benefits. Most of all, it ensures you can move in much quicker, as a seller is much more likely to trust the offer of a potential buyer that has a home loan to back them up. And not only that, but when the mortgage is already in the bag, you’ll be able to adjust your budget accordingly, which gives you a lot more wiggle room, and a more accurate picture of what life as a homeowner is going to be like.
How Far are You Willing to Go?
Of course, a big part of buying a home of your own is determining how much risk you’re comfortable with. And a big part of determining this is your responsibilities – if it’s just you and your partner, for example, you’re likely to want to spend close to the edge of your budget. However, on the other hand, if you’ve got kids to take care of (or other elderly family members living with you), you’re going to want to play it as safely as possible.
It’s also about the savings you have in the bank; if you’ve got an emergency fund, or even just a bit of capital sitting in an investment fund, you’re also not going to be too fussed about buying a house that’s slightly over budget. You know you’ve got support there, if need be, and that’s something to keep in mind when it comes to home ownership. You can overspend, if need be, but at what cost?
What to Keep in Mind
The budget you’ve put together to buy a home needs to be watertight; you’ve got a lot of expenses coming up, and there’s little room for making a mistake. As such, your budget needs to have a bit of wiggle room either way, and it needs to understand the risk you’re willing to take in buying a home. So, when you look at the budget you’ve currently drawn up, do you see these elements? If not, it’s time to get back to the drawing board!