Coldwell Banker Hubbell Briarwood

4 Ways to Avoid Overextending Yourself When Buying a Home Main Photo

4 Ways to Avoid Overextending Yourself When Buying a Home


Amanda Oboza, Greater Lansing Association of REALTORS®
Posted: April 26, 2021 by Matthew Hillier

In March 2021 the median sold price was $172,000 in the Greater Lansing market, up 7.5 percent compared to last year, and on average sellers got about 101.1% of what they were asking.

With limited inventory, stiff competition, and rising prices, it’s easy to get caught up in the chaos and start pushing the limits of your budget. But the last thing you want is to let excitement cloud your judgment and cause you to make an unwise decision.

Here are a few tips to avoid overextending yourself in today’s high-priced market.

Establish Your Comfort Level
Your first step in the home buying journey should be to speak with a local, professional lender who will help you get preapproved for a mortgage. But Aron Clark, vice president and senior mortgage banker for Dart Bank, says instead of focusing on how much they can get approved for, budget conscious buyers should shift their focus to how much they are comfortable spending.

“Nine times out of 10 I can get someone approved for more than they thought, so I would rather have them tell me how much they want to spend each month and we can work backward from there,” he said.


Some financial advisers suggest spending no more than 30 percent of your pretax income on housing. Others, like financial expert Dave Ramsey, are a little more conservative in their approach, suggesting 25 percent as the max.

When crunching the numbers, don’t forget that in addition to your mortgage, you’ll also be responsible for property taxes and homeowner’s insurance, which will likely add a few hundred dollars to your payment. If your down payment is less than 20 percent, there will also be mortgage insurance. And you’ll need to consider general homeownership costs like updates, repairs, and routine maintenance.

Also, remember that lenders are looking at your gross income and monthly debt, but they aren’t aware of other expenses like daycare, auto insurance, medical costs, dining out, vacations, etc. So, from a lender’s viewpoint, it might look like you can afford a certain amount, but you really need to spend much less to keep your personal finances healthy.

Only Look at Homes You can Afford
Once you’ve set a budget you’re comfortable with, it’s time to start looking at properties. But in a highly competitive market in which multiple offers are the norm, REALTOR® Amy Jackson with Coldwell Banker Hubbell BriarWood says buyers should start the search under their max budget.

“If you have a limit of $300,000, then we should look at homes in the $275,000-$280,000 range,” she said. “This will give you some flexibility when you’re competing against other buyers while staying within your comfort zone.”

Homes that are priced right and in good condition are going fast, so Jackson says budget-savvy buyers may also need to think outside the box.

“Move-in ready homes are being scooped up quickly, so you may want to consider properties that need some updates,” said Jackson. “If you’re willing to have an open mind, we may be able to find a home with good bones that is under your budget, and then you can work cosmetic updates as your finances allow.”

Stick to Your List of Must-Haves
An easy way to blow your budget is to lose focus on what you need in a home. Before you begin the search, create a list and sort items into three categories – needs, wants, and wishes. Needs are must-have features that are non-negotiable. Wants may be negotiable, but they definitely factor into the decision-making process. Wishes are things that you’d love to have but they may not be realistic in your price range and they aren’t deal breakers.

When putting your list together, focus on what is changeable and what is not. Location, neighborhood, square footage, and layout are important considerations that can’t be easily changed, but you may be able to finish a basement or update flooring down the road.

Listen to the Experts’ Advice
While your REALTOR® and lender can’t and won’t make decisions for you, they will point out things you may not have considered.

“I just had clients who asked to see a house that was only a few thousand under their max budget,” said Jackson. “However, in the property disclosure I noticed that the seller was keeping all the appliances. So, not only was the house near the top of their range, leaving them little room to compete, but they would also have to factor in the cost of brand-new appliances.”

And when it comes to budget, Jackson said a lot of buyers are reevaluating location.

“For instance, property taxes are much higher in certain municipalities, so I’ll talk to my buyers about where they can get more for their money,” she said. “With so many people working from home, today’s buyers have greater flexibility in location, which can really help when budget is a concern.”

And nothing feels more like a splash of cold water on your face than seeing what your monthly mortgage payment would be if you went over budget. When you find a house you love, check back in with your lender and do the math. Then ask yourself, how does that number feel? Does it make you nervous or are you comfortable with that amount?

“At the end of the day, it’s the client’s decision, but I wouldn’t be doing my job if I didn’t ask questions and point out all the considerations,” said Clark. “I want my clients to be successful in homeownership, and the best way I can help them accomplish that is by educating them on their mortgage so they can make a confident and informed decision.”




You can locate the original blog on Lansing State Journal, HERE!

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