Your budget and rent with option to buy
Buying a home is likely the most expensive purchase you’ll ever make. And if you’ve waited a long time for this day to come, you’ve no doubt thought about the features you want: maybe you crave a massive master bedroom with walk-in closets, or perhaps a gourmet kitchen with granite countertops?
While you don’t want to skimp on the amenities you love, adding too many can drive up the cost and blow your budget. Instead of thinking about right now, start thinking about your long-term financial goals and evaluate your budget before you buy, you can get the home you want without experiencing buyer’s remorse. The one thing to remember is that you can add all the things you love to your home and reap the benefits when the price appreciates more.
When you get pre-approved for a rent-to-own, we’ll determine how much we think you can afford to spend on a home without it being a situation where you have to do multiple jobs just to make your payments. As in many cases, we’ll provide a maximum budget limit, but don’t assume that the maximum number provided is the amount you should spend. The upper end of the budget is based on the assumption that you will have paid off or reduced many of your debts and that your current employment situation will remain the same, if not improve.
1. Confirm your quote online
Do you want to know how much you can pay on your own? Go online and use a mortgage calculator: After you enter a sales price, loan term, and interest rate, the calculator estimates your monthly payment, including property insurance, property taxes, and mortgage insurance private. This can give you a good estimate of how much you can afford based on the asking price, but don’t stop there. Find out if there are other expenses you’ll need to budget for after you buy a home.
For example, will you have to pay the monthly community of owners fee? Will you need to hire a gardening or pest service? Are your utilities likely to increase after you move? These costs can really add up and affect your monthly budget, and if you’re not willing to sacrifice your current lifestyle for the sake of a new home, you’d be wise to choose a less expensive home with a lower price that will result in lower monthly payments. . I suggest creating a priority list for the “must haves” you’d like to have in a home. Make a list of the top 5-10 things in priority order that you can’t do without, down to those items that would be nice to have, but aren’t necessary. By doing this, you’ll be able to zero in on the type of home you want faster, and you’ll be in a better position to stay within your budget when you start shopping for homes.
2. Check your real estate agent
I have only had positive experiences with the real estate agents we have worked with, but not everyone is as lucky. By working with a real estate agent, we establish what the budget is for you and the real estate agent. It is important that you commit the real estate agent to stay within the established budget. Good agents respect your finances and only show you houses you can afford.
That said, some agents may try to go above and beyond and recommend properties outside of your price point. We will be a check and balance and we will not allow this to happen, but you must also be firm and stick to your guns.
3. Avoid being like the neighbors
It’s all too easy to fall into the “compare and despair” cycle. If you’re working with a budget of $250,000 and her best friend just bought a house for $300,000, you may find yourself comparing your home’s options and amenities with his or hers.
This is a nasty cycle to fall into, especially when it comes to buying a home. A house is not a pair of shoes or an expensive bag: if you spend more when buying a house, it is not easy to recover from the error.
Instead of obsessing over the fact that your friend bought a house with an outdoor kitchen, congratulate him and then get excited about what your $250,000 budget can do for you. Maybe you’ll have four bedrooms instead of two, or you’ll have a gas oven instead of an electric one. Then think about the ways you’ll benefit from staying within your budget, like maintaining a healthy vacation or retirement fund, or starting a college education fund for your kids.
4. Avoid bidding wars
Imagine this scenario: You find the perfect house, make a solid offer… and then your real estate agent calls you to let you know that the seller has several offers to choose from. Competing with other buyers is not easy, and to win a bidding war, you often have to increase your offer. This isn’t necessarily a bad thing, as long as you can stay within budget; however, bidding wars can quickly get out of hand. As a general rule, we will normally NOT get into a bidding war, especially if the price of the house is going to be artificially inflated above what it actually is. Why? In a rent-to-own, an appreciation is added to the price of the home for each year you are in the program. That appreciation is usually built on the market value or list price. If this is artificially higher than it should be, it could get you in trouble when you qualify for the mortgage on that home at the end of the lease-to-own term. The lender’s appraised value might not be there due to the inflated price set during the bidding war.
5. Offer for houses that do not sell
Some buyers walk away from homes that have been on the market for a long time, assuming there must be some hidden flaw. But sometimes, the inability to sell a house is much simpler. For example, maybe it just has bad appeal or there’s too much inventory in a particular market.
So it’s important that you don’t automatically rule out a house just because it’s been sitting around for a long time. In any case, look for these houses. The seller is probably motivated and willing to lower the asking price to move the property. This is good news especially if you fall in love with a house that is a bit higher than your budget, as you could negotiate a lower purchase price and it might fall within your budget.
Even if the seller isn’t willing to drop the price, there are still more bargaining opportunities when a home has been on the market for months. For example, you can request contingencies to replace old carpet or paint the exterior of the house. If you can identify the reason why the property did not sell, then you can ask the seller to reduce the selling price of the house or provide a cash award for the repair.
If you’re still concerned about possible hidden defects, state in your offer that the offer is subject to a satisfactory home inspection, which is a good idea no matter what. If the home inspection reveals problems, such as plumbing, electrical, roof, appliance, or window problems, you can ask the buyer to make the necessary repairs or you can withdraw your offer.
Staying within budget when buying a home takes discipline, so approach the buying process carefully. Know what you’re willing to spend and refuse to go over budget for homes. If you can’t find a suitable property after a few weeks or months, check your budget to see if you have wiggle room. If not, wait: it’s only a matter of time before the right house shows up.