Comparing a commercial property appraisal to residential real estate appraisal is like comparing a bread knife and a butcher’s knife. Both are useful, but for different purposes. When buying a home, you need to have a residential real estate appraisal done, not a commercial property appraisal. And the biggest mistake you can make as a homebuyer is to shop around before determining how much you can actually afford.
You will only be frustrated and disappointed if you look at villas yet you can only afford a bungalow. To avoid stress when buying a home, find out what house payment fits your income and start from there. The next thing you need to do is to have a good understanding of your total monthly expenses and debts. This will determine how much money is left of your income that you can use to finance a new home.
Steps to Creating a Budget
- List all your monthly income
- List all your monthly expenses
- Add up all of your expenses
- Compare them to the standard ratios
- Housing – 35%
- Transportation – 20%
- Other expenses – 20%
- Debt Payments – 15%
- Savings – 10%
- Adjust your expenses to match the benchmarks.
- Track your budget by keeping a record of all income and expenses.
Never ignore or forget #6. All of your budgeting efforts will go to waste if you do not correctly track your expenditures. There are free online budgeting tools and apps that you can use.
Elements that Affect your Ability to Afford a Particular Home
Whether or not you can afford to buy a particular property is determined by three factors:
- The price of the property – There are properties that you can easily afford, but they might not fill your needs. Once you know exactly what you need, you can ask a New Jersey property appraiser for the market price of houses that meet those needs. Find an appraiser who specializes in residential properties rather than on commercial property appraisal.
- How much cash you need – You can get home loans that can cover 100% of the price of the property. If not, you will need to have some cash ready to make the purchase. The more cash you have available, the lesser your monthly payment.
- How much the monthly payment is on the loan – Lenders don’t usually lend more than 80% of the property’s market value. Often, they require mortgage insurance. This reduces the cash amount you need as a down payment for the purchase. Mortgage insurance can be acquired from private companies and the federal government. It is best to have an excellent credit rating so you can qualify for mortgage insurance.
These are the factors that you need to look into to find out if you can actually afford a home. Owning a home sounds wonderful, but it is a huge commitment. Once you know how much you can afford, get the help of a New Jersey property appraiser to find the best price for the home that you need.