Good Afternoon all. Here I am at an Open House for one of my friends and I just had an interesting conversation with a prospective buyer. It seems she is out looking for a new home. They are not increasing in size as much as they are wanting to change school districts with two small children. She made a very intelligent remark that I was glad to hear. She stated that "we are looking at something in the $375,000 range but, the bank said we qualified for $500,000". She was actually extremely surprised that the bank would approve them for that much.
So what does your budget include? Just because the bank will give you $500,000 do you really want to live off Beenie Weenies the rest of your life? Do you not want to send you children to college? I am starting to wonder whose fault it is with some of our present problems in the market today. We all know that just because I can get the loan for the BMW 6 series doesn't mean I want to drive it around with bald tires (because you can't afford to buy new tires).
I always consult with my clients as to what they can actually afford versus what the bank will lend them. It is not that hard. Unfortunately many of us do not sit down and actually look at where all our money goes each month. How much do you spend on eating out? What about your monthly bills the ones you know will be there every month. Then think do I really want to max myself out. Do I want McDonalds to become my special occasion place to eat out? I had this exact discussion with a client a week ago. We started the discussion on how much he wanted to spend on his next home. Then we found out how much he was approved for. Now I asked him what he liked to do. He likes to go out at least once if not twice a week. OK, so where do you like to eat at? Hmmmm PF Changsand Flemings. OK now we are getting somewhere. We ended up lowering the amount he wanted to spend because otherwise. He would be going do the street to McDonalds or Wendy's instead of PF Changs.
To summarize just please be careful. Add up all your expenditures and see what kind of payment you can afford. Then if you want to go higher know up front what type of sacrifice's you will have to make, and for how long.
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