A lot of people find the idea of dealing with all of the problems attached to buying a home very daunting. There are so many different mortgage finance products available and the various elements to go to make up these products also vary so much that it can be extremely difficult to decide on which mortgage loan product will be the best fit for you.
Obviously, focusing on the interest rate available from the specific lender is going to be one of the first things that you look at. This is important but there are also many other things that you need to take into account. Another area that many people fail to look at is the fact that once you have your home you may need to do some renovations or you may need to buy furniture, a new kitchen or any number of other things to make the house into a home that you're happy with.
You could start from the point of view of deciding what you want and then trying to figure out how to make that fit into your existing income and budget. This is probably not the best way to go about it. A far better approach would be to sit down with a calculator and figure out exactly what you can afford to spend. Please take into account the fact that the interest rate you get at the start will vary over a period of time. What you really need to do is decide what you can comfortably afford to spend even in a situation where market interest rates may go against you in the future. Once you have established a figure here which also includes any possible renovations that you may need to do the house then you can go ahead and start looking at the market from the point of view of what you can actually afford rather than what you would like to be able to afford.
Once you start looking at houses, it's extremely easy to get sucked into the idea of paying that bit extra to get the house that you really want. There's nothing wrong with wanting a particular home but it's very important that you don't allow this to cloud your judgment in terms of what you can afford.
So my advice would be to start with what you can afford and then look at what's available because if you're inclined to do it the other way around then chances are you will invariably finish up in a situation where you buy a house that will leave you in serious financial difficulty if the market trends and interest rates go against you.
The other area that you need to be very careful with is the idea that you finish up a buying a house that you can barely afford but that it also needs quite a bit of renovation done. For example, it needs new furniture new kitchen etc. It's very important to factor these into your figures as well.
It's always vital to remember that when you own a home that you could actually afford the mortgage repayments on, you're likely to have far less stress in your life. If after a period of time your personal income circumstances are better and you're still not happy with the house you have, you can always trade up. Once you've built up a good credit rating and a certain amount of equity and you're already in the property market then there are any number of options over the longer term. But on the other hand, if you get into the market at a level that you can't afford and have to get back out of it because of that, you will leave yourself in a situation where you damage your credit rating and lose the equity of the home you have. You will also put yourself in a situation where it may be far more difficult to get into the market at a later date.
So basically, the moral of the story here is always get into the market at a level that you can afford and even if that is not what you would ideally like, it will at allow you to build up from there and leave you in a far stronger financial position over the longer term.
Tom writes for Mortgage Advice And Calculators
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