For many potential homebuyers today, adding a mortgage, insurance, property taxes and more into their budget can seem like a lot to undertake, especially for the 24 percent of buyers who have student loan debt with a median amount of $28,000.1 Many think homeownership costs will get in the way of living the type of life they are accustomed to, whether that includes pampering a pet, dining out at new restaurants or traveling around the world.
A home purchase doesn’t have to mean the end of all you’ve gotten used to. Twenty-one percent of buyers in 2018 were influenced by how close their home was to entertainment or leisure opportunities, while 25 percent wanted to be close to shopping.1
Help your clients understand that the keys to comfortable living in homeownership include sticking to a budget, knowing what they can afford and managing extra costs wisely. Give your clients these 4 tips to follow:
- Practice a homeownership budget first. Before buying, encourage your clients to estimate any new costs. If they expect their total budget to increase as owners, they can try setting that money aside into a savings account to help paint a realistic picture of what it will be like to live with a little less discretionary income—can they still maintain what they’re used to, or will they need to find places to trim from their everyday spending?
- Manage credit & keep on top of debt payments. Typically, the better credit score a client has, the better the likelihood of a more favorable interest rate, which means lower monthly payments.
- Don’t spend the entire preapproval amount. Getting preapproved is a key step in the home buying process. But people are often preapproved for a higher amount than they’ve budgeted for. Advise clients that they don’t need to spend their entire preapproval amount. Staying under the approved limit means they’ll have more money on hand after purchasing to still live comfortably.
- Understand the importance of insurance. Most lenders will require buyers to purchase homeowners insurance. While shopping around for a good deal or saving money by bundling policies can keep homeownership costs down, it’s important for clients to consider the quality of the coverage. In case something does go wrong, the insurance could cover major costs instead of sinking your client’s budget or depleting emergency savings.