Buying a home means the careful planning of your finances and making sure it’s really something that you can support? One of the biggest challenges home buyers face is budgeting for a new mortgage payment. If you’re going to be buying a house here are the things you might want to consider as it relates to purchase price…

The purchase price of the property is certainly important however, but the end of the day it will boil down to what your new mortgage payment is going to be. This is even more important if you are renting because it’s likely that the mortgage payment is going to be higher than your current rent payment.

Consider the following examples…

$100,000 in spending power translates to about $600 per month of mortgage payment

$50,000 in spending power translates to approximately $300 per month of mortgage payment

$25,000 of spending power translates to approximately $150 per month of mortgage payment

$10,000 translates to approximately $75 per month of mortgage payment

All of the above scenarios are a fair barometer of how much purchase price relates to payment. If you’re buying a house and you’re in a negotiating situation even as little as $10,000 in spending power what seems like a lot only represents about $75 a month mortgage payment. $75 a month of a mortgage payment can be easily offset by not going to coffee so frequently in the course of a month or by paying off a credit card containing a minimum payment of $75. You can easily offset that within your budget and cash flow if you truly want it. That’s the separator how bad you want the house?

Is making a small financial concession in your life such as not getting the extra three to four cups of coffee a month for example for paying off that credit card worth your future family dreams and memories that house will support? It really boils down to that black and white type decision.

The same financial justification holds true no matter what your negotiating position is. Even if it is $100,000 and the payment differential is $600 a month the same thing holds true. It’s probably realistic that if there’s $100,000 swing in purchasing power you’re probably going to be a bit stronger financially then if you’re going to be going back and forth over something as little as $10,000 all things being equal for example.

The only other way to manipulate borrowing power besides changing the purchase price of the property is changing your down payment, paying off debt, putting more money down, or potentially changing mortgage loan programs.

Quick mortgage tip: if you’re looking at a 3.5% down FHA loan in comparison to a 5% down conventional loan the payments are almost equal to each other and there’s no real value going into a conventional loan versus an FHA for the extra 1.5% in down payment if payment is a factor. Something to think about when you’re ready to explore the possibility of being in the market for a new home.

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