As many of you know I am participating in a month-long financial challenge with my fellow P&G Moms. Part of that challenge is reading through Money Rules by Gail Vaz-Oxlade. While most of the rules have left me feeling like I had a long way to go before achieving my financial goals one stood out as something I did right. In fact if more people did this one thing the market crash in the US may have gone differently.
Rule #14 Don’t let your lender decide how much home you should buy.
Both times before going into the home buying process I sat down with my budget book and figured out my month expenses vs income and estimated how much insurance and taxes would cost on a home. I then used a mortgage calculator, which is available on most banks websites, to figure out what price ranges fell into my budget and then used that as a guideline for our Realtor when looking for homes. During both experiences we went into our banks to get pre-approved for a mortgage and were approved for amounts that were $25,000 or even higher than what I had calculated. Had I purchased properties using the banks recommended amount I would have had trouble, or been unable to make my payments. Even the Realtor tried convincing me to look at houses that were higher with the promise that we could “Talk them down”. In both cases they were looking out for their own interests and not mine.
In the end I stuck with my budget for the most part, only going over by $3000, and haven’t had to struggle to make payments. Less stress, more room for those unexpected expenses which ALWAYS pop up and even room for renovations. When making the biggest purchase of your life make sure you have all your ducks in a row and know exactly how much you can spend, how much wiggle room there is and then work within those parameters.
Disclosure: I am a P&Gmom/mamanP&G. As part of my affiliation with this group I receive products and special access to P&G events and opportunities. The opinions on this blog are my own.