Real estate prices have risen nationwide over the last several years, after bottoming in early 2012. As competition for purchasing real estate heats up, it’s tougher for buyers to remain cool under the pressure.
In a seller’s market, it’s common for buyers to view many properties, and lose out on a few, before an offer is accepted. It is tempting to pay whatever it takes to come out ahead just to end the arduous process.
Resist! Otherwise, when the market corrects, you could very well find yourself paying for a house that is worth less than your mortgage balance. Here are some key things you can do to avoid getting caught up in the moment and overspending on your house:
Make a Budget, and Stick to It
A recent survey showed that one-third of home buyers spent more than the top end of their budget over the previous four years. Just because it’s a trend, doesn’t mean it’s the best thing to do.
It’s important to make a realistic budget. There are a lot of online mortgage calculators that calculate your monthly mortgage payment, including homeowner’s insurance and real estate taxes. Going through this exercise shows your payment under different prices.
If you’re tempted to spend whatever it takes, plug in the revised number. Then, ask yourself if you can afford it when you compare the new payment to your monthly income, and remember, there are other housing costs to consider. The Federal Housing Administration applies a maximum debt-to-income ratio for a conventional mortgage.
Look at The Current Market
It’s important to understand the current market. You can use websites to examine what prices other properties in the neighborhood have recently sold for; certain websites even provide a current market value estimate.
Your Exclusive Buyer’s Agent is there to help you. He or she provides guidance and will let you know the property’s fair market value based on the Agent’s experience and expertise.
There Are More Homes in the Sea
You should always remember that there is not only one perfect dream home. Of course, it can be disappointing, sometimes even devastating, to lose out on a home. But there are more that are on the market…or coming soon.
Wants vs Needs
There are certain requirements you feel a house must have in order to fulfill your lifestyle. However, you may want other things. You should not confuse these two.
Distinguishing between wants and needs allows you to determine items you can comprise on, helping you stay within your budget.
Prepare for the Breakup
You should try to stay emotionally detached from the prospective home. This is easier said than done, of course. After all, you are not just buying a house, but a home.
However, once a price is above your affordability level and the home’s fair market value, the best option for you is likely to walk away. Your Exclusive Buyer’s Agent will advise you when it reaches this point.
Yes, this means starting the process over. If you find you are emotionally and physically drained, take a break before delving back in. The National Association of Buyers Agents will be here to help you get back on course when you’re ready. Review our list of Agents near you and get the help you need today.