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How to stick to a budget when buying a home

By Andrew Bell

Buying a home is likely to be the biggest purchase of your life, and that means even relatively small variations in the price at which you buy can have massive long-term impacts on your personal finances. As a result, you should make the greatest possible effort to set a budget and stick to it closely. You don't want to buy a home only to find yourself in financial peril a few years down the road because you can't really afford your loan.

With that in mind, you need to know the strategies that will help you stick to your budget no matter what happens in the homebuying process.

1) Get pre-approval on a mortgage

One of the easiest ways to stick to your budget is to have your mortgage lender do it for you. Domain recommends that you start by getting pre-approval on a loan, a bank will tell you the upper limit you can safely borrow, and that will mean you can't reasonably exceed that number without having to go back to the lender. To some extent, that takes the decision out of your hands.

2) Find other ways to make your offer more attractive

Of course, if you are working with a hard and fast upper limit in your search, given the state of the housing market across Australia, you may find yourself being outbid for any given property. For that reason, you can improve your offers in other ways, such as by highlighting that, with pre-approval, you can provide a faster sales process than others might — or that you will accept the home with fewer conditions.

3) Crunch the numbers to understand the true cost of homeownership

Another great way to just mentally make it less enticing to exceed your budget is by looking at what buying a home for even an extra $10,000 more will cost you in the long run, Investopedia recommended. With a house, you will likely pay far more for your insurance, maintenance and utilities than when you live in an apartment, and so just the cost of the mortgage (and perhaps mortgage insurance as well) are far from the only ongoing cost considerations you have to keep in mind. With that knowledge, you may be a little more cautious about bidding.

4) Give your agent all the details

When you're buying a home, you will be wise to have a buyer's agent by your side to provide critical counsel and help you find options that you want. According to Money Crashers, you should count on them to point you toward properties that fit your needs but won't bust your budget. You may even want to empower your agent to rein you in if you're getting too close to your budget limit.

5) Look for different options

Finally, you no doubt have a list of must-haves and nice-to-haves in mind when you're shopping, but you should consider how much wiggle room you have with each. If a given home has, say, five of your six must-have features or qualities, is that good enough? If so, that can help you avoid busting your budget.

For those who are going through the home purchase process for the first time, it's not always easy to follow the strategy you set out for yourself. But if you have the advice and guidance of an experienced real estate professional, sticking to a budget is a far more realistic outcome that sets you up for long-term financial success. Get in touch with the experts at Ray White Surfers Paradise today to learn more about what we can do for you.

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