Posted on: 30 March 2017Share
Deciding how much money to spend on your new home is a big question. Of course, the amounts of your home mortgage loans pre-approval will be a guideline. But should you take out more or less than this amount? Here are some factors to consider.
Can You Get What You Need?
The first question to ask would be whether you could be happy with what you can get for the amount you're approved for. Or, could you be happy with spending even less? It's definitely something to consider, since it would leave you with more potential savings to spend on other life events that could come up and require additional loans or monthly payments.
Are You Sure You Can Pay?
Another factor is whether you think the bank's assessment is accurate. Maybe you have a high income at the time of the loan application, but are you sure that it will last for the next 30 years? It's up to you whether you want to be conservative or not, but it can sure keep you out of a pinch if you need to take time off work or the economy changes.
Do You Want to Expand the Home Later On?
If you plan to add on to your home later on, by adding bedrooms, renovating, or adding a special feature, this is something to consider now. Home makeovers can easily cost tens of thousands, so maybe it's wise that you stick well under your approval amount if you have big plans in the near future. Of course, your plans to remodel are tied in with which particular home you choose to buy, so it could take some heavy planning to estimate the total home cost of each option, including add-ons.
Can You Get Money from Other Sources?
Finally, if you find yourself wanting more home than you can afford, there is always the option of getting a loan on top of your mortgage. Private lending companies and peer-to-peer lending are two common options. This is for cases where you have your heart set on a home that's just a little bit outside your price range. But be careful that you don't get overcommitted; taking out loans from more than one source should only be considered when you are confident that you can pay more than what a bank lender thought was your limit. You might have sources of income that you can't count on your bank appraisal, for example.
For more information, talk to a professional like Dave Schell at Guaranteed Rate Mortgage.