Mistake #6: Buying a house you can’t afford
Just because a lender is willing to loan you more money than you thought you wanted to borrow, that doesn’t mean you should change your home buying plans. Buying more home, or anything else you really can’t afford can quickly lead to headaches, stress and money worries. Keep in mind you are buying a shelter for yourself which will probably appreciate in time but don’t forget you will still need money for other things.
As a rule of thumb, I would recommend your mortgage payment be less than 25% of your gross monthly income unless you buy an energy-efficient home or one with a HERS index rating of less than 60. Obviously, the higher your utility bills the higher that percentage gets to where it can become 40-50% of your gross monthly income. Besides your mortgage payment and utilities, you need to be prepared for additional costs of homeownership, such as homeowners insurance, property taxes and maintenance which could be more on a wood structure vs. concrete block depending on the area you buy.
Consider scaling back on the size of the home you’re looking for in order to make the whole investment fit into your budget. Keep in mind you want to own the house and not have the house own you so you can’t afford to do anything else or you take on credit card debt for vacations or emergencies.