Now seems a particularly good time to buy a house because, first of all, mortgage interest rates are low. In addition, home prices are still increasing (though at a slower pace than previously), so it might be a good idea to buy before prices increase even further. Still, you shouldn’t just rush out and buy in order to take advantage of these conditions – a certain amount of caution is still called for. You need to know what you can afford, as well as what you can continue to afford to keep your head above water financially. So check out these 5 ways to make sure you don’t get in over your head when buying a house in Eugene.
1. Get Pre-Approved First
Before you ever begin home shopping, it’s a good idea to go to your lender and get pre-approved for a mortgage loan. This really should be your first step toward buying a house in Eugene because of all the time, effort, and frustration it can save you.
The two main reasons for pre-approval are:
- “You’ll get a real dollar figure that can serve as a solid basis for determining how much you can afford. Your pre-approval letter represents the maximum amount that the lender can approve you for.”
- “It shows real estate agents your offer merits serious consideration because you’ve already taken concrete steps to secure financing.”
Pre-approval, then, means you know what you can afford, and you will be seen by sellers as a serious buyer. Your lender will examine your credit and assess your repayment ability before granting pre-approval. And because you know your borrowing limit, you can spend your home shopping time looking at only those houses within your price range. You’ll also have more negotiating leverage with that pre-approval letter in hand.
2. Shop at the Lower End of Your Price Range
Then when you know your realistic price range, another way to make sure you don’t get in over your head when buying a house in Eugene is to shop at the lower end of your price range. You don’t have to spend as much as your pre-approval indicates you can. Better to allow yourself some financial breathing room than to stretch yourself to the limit. Those in the industry recommend shopping at the lower end of your price range because “you free up extra cash for things like remodeling and new furniture. Instead of feeling stretched when the mortgage payment is due, you can rest easy in your wonderful new home.”
3. Be Aware of the Additional Costs
Also, to make sure you don’t get in over your head when buying a house in Eugene, you need to be aware of the many other costs. For you will wind up paying for a lot more than just your monthly mortgage payment.
Even with a new home, there will be maintenance costs, and it won’t be long till you will have to make repairs. And the other inevitable costs and expenses include:
- Mortgage processing fees
- Closing costs
- Homeowners insurance
- Property taxes
- Private mortgage insurance (if you paid less than 20% down)
- HOA fees (if applicable)
Being aware of and preparing for these additional costs can help you make sure you don’t get in over your head when buying a house in Eugene.
4. Set Aside Emergency Funds
You obviously need to set aside reserve funds for the additional costs. But there are other ways you can get in over your head when buying a house in Eugene. For example, you might have an unexpected illness, suffer a catastrophic injury, or even lose your job. Still, those mortgage payments have to be made every month, and having emergency funds will help you keep your head above water.
Maybe you haven’t taken a close look at your reserve funds, but you can bet your lender will. According to financial experts, here’s what lenders examine: “When lenders measure reserves, they take a look at the assets you have in the bank and determine how long you could continue to make your full mortgage payment in the event of a job loss or other source of financial stress. You may be required to have anywhere between one and six months’ worth of reserves, depending on the loan program you’re trying to qualify for. This means having money to pay principal, interest, taxes, and insurance, as well as any applicable homeowners association dues.”
5. Understand Affordability
All the foregoing has really been leading up to this way to make sure you don’t get in over your head when buying a house in Eugene – and that is understanding affordability. You won’t get in over your head if you know what you can truly afford. You can find a variety of plug-n-the-data tools online to help you calculate affordability. And if you know the area and neighborhood where you want to buy, you can also find online estimates for the cost of taxes and insurance. We recommend, as a great way to make sure you don’t get in over your head when buying a house in Eugene, that you lean on the knowledge and expertise of your qualified local real estate agent. Find out today how our agents can help.