I see it all the time. I’ll be going through an initial consultation with new buyers. They are of course very excited and I’m excited for them. At some point the conversation will bend to how much they are willing to spend on their new place. The couple will say, “Well, we’ve been approved up to $300,000, but we really only want to send $220,000. I say okay and customize a search to meet their criteria. A few days go by we go out hunting. We look at a couple places and I can tell something is up. They’ve been doing their own side hunting –and who can blame them. The internet makes it so easy. First you start looking at the homes that are $220,000. Then you get curious, ‘What does a house for $250,000 look like? We’re approved up to $300,000. No harm in looking.’ Honestly, there is no real harm, but once you’ve opened that door it’s hard to look back. The house that is $220 will not hold a candle to the one that is $300; it can’t. And in my experience only the incredibly strong willed are able to come back down that golden staircase. I want my customers to be happy, and that is the heart of the question. What is going to make them happier; a $300,000 home or a more affordable monthly payment? If it’s not a stretch to make the $300,000 mortgage payment go for it! But if that payment is going to be too big a burden, the house will also quickly turn into a burden.
Here is my advice to you the home buyer.
1. Before you go to talk to a lender sit down and figure out a budget.
2. When you go to talk to your lender come in with your monthly payment firmly set. This monthly payment will translate into the total purchase price of your new house.
2. Don’t even bother to learn your outer barrier. Use the monthly payment as your outer barrier.
3. Don’t look at houses above your price range. Sure you may qualify for the loan amount but you want to enjoy your new place not resent the monthly payments.