Affordable Versus Comfortable
As a REALTOR I make this comment frequently, as frequently as of today. I will never ask anyone regardless of their financial ability “what can you afford”. I would rather discuss “what are you comfortable with.” To me there is a significant difference between the two. One can be insulting and the other will invoke thought.
The last scenario you want to be involved in is owning a home and not being able to do anything but pay off your debt obligation. This obligation also includes taxes, insurance, HOA, utilities and preventative or any repair issues. Some mortgages also will require PMI or private mortgage insurance. There are also normal maintenance or upkeep expenses such as lawn care.
Just because the bank pre approves you for $300,000 doesn’t mean you have to spend $300,000. In some scenarios you might be comfortable with a specific payment amount, but you won’t have a cushion for emergencies and can’t afford to continue or contribute to your long term financial plans.
A few of the items to consider and discuss would be do you have an emergency fund. A strong emergency fund would be the savings of a minimum of 6 months of cash flow.
If you are planning on remodeling or doing a few home improvements consider an incremental game plan. Get settled in to ensure you have no hidden costs or expenses that you never saw or anticipated. Many people who do not have the funds or budget move into a home and never take the foot off the accelerator. Go slowly and utilize some patience by prioritizing your wish or project list, as a little patience can go a long way.
Be careful of a home equity loan. Although the underwriting of these loans has tightened they still are available and then you are borrowing against the equity of your home. As we all have learned, that equity can potentially erode or completely vanish. It is very important to make sure you maintain that comfort level buffer of debt versus income.
Also as a homeowner in Chatham County make sure you understand the benefits of the Stephens-Day act. Talk to your accountant also as your payroll withholdings may be adjusted as a homeowner for your net tax liability.
Overall, spending under what you are approved for, having a savings cushion, and doing improvements incrementally, will help you stay more comfortable in your home. I hope everyone was unscathed while staying safe with minimal or no property damage from Matthew.
Pete Chaison is co-owner of Savannah list For Less and can be contacted at either 912.13.2759 or firstname.lastname@example.org