55% of home buyers willing to go over budget: A bad idea
Spending too much on a house can have a multiplying effect on personal finances. Don't get caught up in the moment, experts say. Credit: Getty Images / fstop123
Blowing your budget when buying a new pair of Jimmy Choo shoes or Michael Jordan autographed sneakers is one thing, but doing so when house hunting can leave you with extreme buyer’s remorse.
It’s easy to get caught up in the moment. A new survey of 1,200 people considering buying a home this year, from online brokerage Owners.com, found that 55 percent said they are willing to go beyond their budget, and to do so to the tune of nearly $40,000.
Nix that idea. Here’s why.
- The ripple effect
“Overspending on your home can lead to an expensive spending vortex and a financial risk many would be better off avoiding,” says Lou Cannataro, senior partner, Cannataro Park Avenue Financial in Manhattan.
Usually the higher the home price, the higher monthly expenses — which are directly related to your initial principal and interest payments. The more expensive home will usually come with higher real-estate taxes, utilities, landscaping and pool maintenance and requiring more furnishings. All of these items, plus higher closing costs and the possibility of having to also pay for PMI (private mortgage insurance) payments (if you cannot afford the appropriate down payment), create a large monthly burn that can take a big bite out of the best of incomes, says Cannataro.
- Expect the unexpected
“One potential danger of exceeding your homebuying budget is not having money left over for unexpected costs,” says Ray Rodriguez, a regional mortgage sales manager for TD Bank in Manhattan.
- Get preapproved for a loan
Julie Gans, a real estate sales representative at Triplemint Real Estate in Manhattan offers a strategy for staying in your budget: “Get preapproved for a certain loan amount before you start searching.”
