Buying your Maryland home - loan approval vs. comfort level
Reflecting back on the precrash market, buyers were a lot different than today. Back in those days it seemed to be less about finding a home than just a house. It was the nature of the beast. We all started with the best of intentions, hunting for the home of our dreams. However, writing offer after offer, competing against 10, 15 other buyers took its toll.
'Lets just finally get something, we will figure out how to make ends meet later or how to turn it into a home.' Expectations were lowered, purchase price escalation clauses added, big compromises were made and in many cases buyers opted to go above and beyond their comfort range. [the role predatory lending played in all of this is another topic]
I admit that I struggled with some of my clients' decisions. I did not - and do not - want anybody to feel like they have to settle for just something but I also advise against going out of your comfort range. Your comfort level can be a whole lot different than your loan approval and it's important to take a close look at both.
You may qualify for a monthly payment of $2,000 but may feel like $1,800 is the most you can afford to keep your current lifestyle. Which one would you rather do - go to your max and cut back on the things you enjoy or keep on living the way you do and lower your house-buying budget? Cutting back on dinners or vacations may be worth it to some but not to others. Your comfort level is very personal but it should be an appropriate one and enable you to be financially healthy.
There can be many reasons why your comfort level may be lower than your loan approval. You may have a special savings account you contribute to monthly which is money you shouldn't calculate with. Or how about the $100/month you pay for your child's drama club or gymnastics?
If the payment you are comfortable with is lower, you may have to make compromises somewhere else - without having to settle hopefully. You may not get everything on your wish list or the location you've dreamed about - but in the end opting for a three vs. a four bedroom home for example may be worth staying within your comfort range.
My advice: before you start house-hunting, get out your budget and figure out how much money you are truly comfortable with spending on your monthly payment - don't forget utilities and a little cushion for home repairs/improvement!
Planning, Budgeting & Goal Setting: