Buying a home is a major investment, one that is truly worth it to provide your family with a place to grow. However, securing a mortgage is really the first part of the battle. You must also ensure that you can handle the debt associated with homeownership to stay afloat.
There are a few simple steps you can take to keep debt at bay and manage your finances better. Being proactive offers you the best chance of financial stability well into the future.
Only borrow as much money as you can afford
A budget is your best friend during the home buying process. Before getting started, crunch the numbers on precisely how much you can afford. Factor in monthly mortgage payments, the down payment, home insurance, utilities, taxes, and all other fees associated with homeownership. Now compare this figure to your current income and any debt you already have. Even if you can get approved for a higher loan, doing so increases the risk that you will not be able to pay it back.
Be wary of variable-rate home loans
Variable-rate loans are attractive because most people pay much less at the beginning of the loan. Loan payments can skyrocket during the course of the loan depending on interest rates, which might leave you in a real predicament. Fixed-rate loans are consistent, so you know exactly what you will need to pay throughout the course of the loan.
Make more than the minimum loan payment
Making the minimum loan payments means you will pay full interest on the principle. Conversely, making more than the minimum payment can drastically reduce the amount of interest you pay. While you might not be able to make more than the minimum every month, try to increase payments whenever possible to pay down the loan quicker.