Are You Prepared for Unexpected Household Expenses?

Household expenses

Can You Afford a Home?

Do you know how much house you can afford? Sure, you have plugged in some numbers into online calculators, and maybe you have been pre-approved for a mortgage. But is that enough? Not really.

Household Expenses

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Here’s the deal. Mortgage lenders, such as Shamrock Financial, can help you determine how much money they are willing to lend you. This is based on your financials – your income, your debt, and more. And while how much they are willing to lend you is certainly a great starting number, there is more cost to owning a home than just a mortgage. Creating a list of household expenses can help you be prepared for the unexpected.

Perhaps you have talked with your real estate agent. You let them know how much you have been pre-approved for. Great! So they start to show you homes in the upper range, possibly even exceeding just a bit. After all, homes in a higher price range tend to be nice…really nice. And who wouldn’t want a really nice house?

But with a really nice house comes really nice costs. And that is not just talking about closing fees, moving expenses, and legal costs either. Your mortgage lender, such as Shamrock Financial, will list each and every cost associated with the actual purchase of your home. But the price of home ownership is not just limited to purchase and closing expenses. That’s where home owners can get into trouble – forgetting to account for all operating costs of that home.

Homework Time

Your motto should be: be prepared! Doing your homework well before you get pre-approved or seeing homes with your real estate agent is what you need to do. Do you know where to start?

  1. Get pre-approved: Yes, that’s right. Getting pre-approved gives you an idea of the maximum you may be allowed to borrow. Use this number as the absolute maximum amount you will pay in your home owning budget.
  2. List all regular household expenses: Owning a home has different recurring expenses from renting. Make a list of these, from property taxes to seasonal costs, such lawn seed.
  3. List all irregular household expenses: Houses always need some fixing so you need to budget for those items too. Depending on the age of you home and its components, account for items like replacing the roof, dishwasher repairs, and plumbing help.
  4. Determine your renovations: When you purchase your home, you probably want to put your personal mark on it. This is understandable in an older home, but even in a new home, you may want something other than builder’s beige on the walls. Again, brainstorm all of the possible updates and renovations you may want to make along with their possible costs.
  5. Remember your other expenses!: Food, savings, transportation, daycare, gifts. You cannot forget all of the other, non-housing-related expenses in figuring out how much you can afford.
  6. Buffer time: Review your list – it probably has a lot of entries in it. But always give yourself some extra room for costs that are higher than expected, or for an expense that you did not, and could not, have accounted for.

After creating your list, start to work backwards – figure out how much you can spend comfortably per month overall. Then start subtracting your buffer, non-housing expenses, renovations, and recurring costs. The number that is left is what you can truly afford to buy a home.

Add Shamrock Financial to Your Calculations

Owning a home is great. Knowing that you can afford the whole shebang with some buffer is fantastic.

Shamrock Financial Ultimate E-Book Guide to Home Buying

 

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