CREATE THE STRONGEST NEGOTIATING POSITION
In order to be in the strongest negotiating position, you need to present yourself as a qualified buyer who will not add unnecessary contingencies on the offer. What makes a qualified buyer? Well, one of the most important things is that you have the money to purchase the home. Since it is a rare buyer that has saved enough money to make a cash purchase, it is important to be able to present yourself as a buyer who is confident regarding his financial situation, who has money saved for a down payment and has already confirmed that you can borrow the amount of money needed to purchase the home. Our focus for this lesson is budgeting, and for the next two lessons is Mortgage information. Knowing and understanding the details about your own personal financial situation as well as knowing what lenders expect will enable you to be confident in your home purchase and will allow you to purchase a home that you can really afford.
It is fun to begin looking for homes, but it makes no sense to look at homes that you are unable to purchase. An important first step before beginning your home search in earnest is to consider your own budget. There are a number of financial obligations about which a lender will ask you questions, and there is also some financial information that a lender does not consider, but that you should!
For example, a lender will not ask you how much you intend to tithe to your church. That information will not be computed into the formula that a lender will use to determine how much money they will lend you. This information SHOULD figure into the formula that YOU consider. Another example that does not figure into the information that a lender requests from you is the amount of money that some people commit to Christian education. These numbers should be a part of your own budget even though the lender does not include it his decision. A lender will usually lend you a good deal more than you should consider borrowing. Being a “slave” to your house payment, or worse yet, being unable to meet your payment obligations creates a terrible position and more tension than anyone needs to live with.
Plan conservatively! Your home needs to be a sanctuary for you. Living with a high level of stress because you cannot afford an unrealistic dream is not going to provide you with a sense of peace. Determine what you can truly afford and adjust your “dream” accordingly. If, after getting a handle on your budget, you decide that the home that you are able to afford is too far from your dream, you have a few options. We will discuss the options near the end of the lesson. For now, we have a few assignments for you.
We have a budget worksheet that you can use to think through all the aspects of your budget. Knowing what is coming in and going out is the first step to getting control over your finances. You can download the sheet by going to www.ExodusNetwork.com/buyer101/budgetworksheet.pdf Take some time to fill out the budget worksheet with ACTUAL information. Do not exaggerate the income you earn and do not underestimate the money that you spend. You may need to actually spend some time “writing down” every expense for a week or a month to get a real feel for how you spend your money. It is easy for us to spend a dollar or two on a cup of coffee each day and not recognize how much it costs. Once you have the budget sheet completed with “solid”, “true” information, you can determine how much YOU CAN AFFORD to spend every month for your mortgage, insurance, taxes and other housing related expenses. This will give you good information to be aware of when you have the conversation with the lender.
A good guideline that many use is that your mortgage payment should be no more than 25 to 33 percent of your monthly gross income.
Not Content with Your Available Funds?
If you are not happy with the amount of money that you have to work with to purchase a home, you have a few options to consider. You can work at eliminating some of your expenses, you can rent for a period while you save a greater amount of a down payment, or you might consider living with a specific budgeting plan. If you would like some additional budgeting help, here is some information that may help you get started with a budgeting plan www.ExodusNetwork.com/buyer101/budgetingsteps.pdf.
The Veenstra Team has excellent relationships with preferred lenders. If you would like to speak to a lender about your financial situation, call the Veenstra Team at 269-350-5514 to get the names of some lenders that provide excellent rates with exceptional service.
MORE THAN YOU EVER WANTED TO KNOW ABOUT MORTGAGES AND CREDIT.