The Most Common Signs You're Buying A Home You Cannot Afford

Buying a new home is so exciting, and it can be addicting to look at homes you wish to make your own while you go through this process. Whether you’re buying or building, you should keep in mind that your budget should trump every other aspect of this process. Most importantly, you should know that just because the bank tells you that you can afford this much doesn’t mean you can. You might take that preapproval to heart and find a home you can’t really afford, but these signs can help you avoid buying a home you really cannot afford.

Your Mortgage is Very Creative

Here’s the deal. If you have to get creative with your financing options to get into a home, you cannot afford that home. If you must take out a loan that has various terms such as combining a traditional mortgage with a small interest-only mortgage with a line of credit, it’s time for you to consider you cannot really afford what you’re trying to build or buy. If your simple mortgage has less than desirable terms but you think you can get through this for a year or so before refinancing for a better rate or mortgage, you cannot afford this house.

You’re Not Making a Down Payment

There are ample opportunities for you to find down payment assistance or even go without putting any money down on a home, and it’s also a sign you’re not ready to buy a house. You can do it, but you might find you cannot afford the house you’re buying. Ideally, you should put down at least 20% of the total value of the house so you can avoid paying private mortgage insurance.

If your plan is to finance 100% of your home, it’s a bad sign. You’re going into your home without any equity in it, and you might not be able to afford to sell if something happens to your income or even your home. Even with programs that don’t require you pay PMI such as a VA loan, financing 100% of your mortgage is a sign you cannot afford what you’re going to buy, and it’s a bad way to begin your life as a homeowner.

You Need to Make Life Changes to Acquire A Mortgage

If you walk into a bank to qualify for a loan and they tell you it’s not possible unless you sell a few things, you’re not ready to buy a home. You won’t qualify for a mortgage if your debt-to-income ratio is too high, which means you owe more to creditors than you earn each month. The bank might tell you a mortgage will be possible for you if you sell a car, get rid of your boat, or pay off your credit cards.

It’s a great idea to get rid of your debts, but it’s not necessarily a good idea to get rid of debts such as a boat or a car just so you qualify for a mortgage. It’s yet another sign you cannot afford the mortgage you’re trying to afford. If you have to make major life changes, you probably can’t afford the mortgage.

Your Gut Tells You it’s Wrong

You want a new house, but you have a sinking feeling this is a bad idea. You shouldn’t have that feeling. You should feel excited, nervous, and even a little apprehensive about buying a new home. It’s expensive, and it’s just normal. However, you should not have a feeling in the pit of your stomach that your life is going to suffer from this new expense and this home.

If you are getting creative with financing, you cannot afford to put money down, and you’re selling vehicles and other things you have a loan on just to receive a mortgage, you probably cannot afford the house you’re going to buy. Either look for a house that’s more affordable or spend a few more years saving so you have enough money for a down payment on a new home. Buying a home is wonderful, but losing it because you get in over your head has a long-lasting negative effect on your entire life.

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