Post # 31
We bought at the very top of our budget, but the way we calculated out budget was based on genuine current expenses (BF is in finance so we had spreadsheets coming out of our ears). We never assumed that we would cut down any spending, so calculated it based on eating out X many times a fortnight, going on X many domestic or international trips, tickets to concerts or plays etc. We also then assumed that interest rates would rise by up to 3% pa.
If your budget is just based on current interest rates and assumes that you would cut back spending, I would NOT go to the top of your limit. It’s a really dangerous place to be in and you will likely experience mortgage stress.
Post # 32
abouttodoit17 : I guess it depends what your mortgage payment is… ours is about $1200/month at a great interest rate, and our biggest monthly expense where I live is electric/heat at equalized $300/month (plus propane for our fireplace). I add up all of the monthly expenses (including cell phones which are stupid expensive in Canada compared to when I lived in the USA!) and divide over the year (since winter months are more expensive), that my banker was pretty on point.
However in my area you can get a semi-detached for $125,000 or less, a bungalow for $125,000-200,000, and a two story for $200,000+. For comparison the very extravagant homes listed are $350,000-450,000 and there would be only large estates with what would be considered mansions or multiple dwellings over $750,000….. which is a very low priced housing market!!
My bankers statistic would probably only apply to areas like mine, as many people have mortgage >$2000 I wouldn’t expect those people to have an equal amount of monthly expenses.
Post # 33
We got pre approved for more than we wanted to get approved at but it gave us some wiggle room. We started to look at houses that were 30% below our max and we were getting outbid and we were getting pushed further out of the city (we live in Seattle). Finally, we realized that we had to up our amount to find other options. The house we found was 5K less than our max. We put in our offer at our max with no escalation. Thankfully they picked our offer because we offered 8% non refundable deposit while the other offer only offered 2%.
I guess it all depends on the market. If you can afford to wait out and find a house less than your max then wait til you find a house you love and that you feel comfortable buying. However, if it’s a sellers market you should escalate to your max.
May I ask where you live and what the market is looking like?
Post # 34
I think the fact you’re hesitant is a sign you should not
Post # 35
Yup! Three years ago almost to the day I closed on my home that wasn’t just at the top of my budget but $4k over! We have managed but it does cause me to stress A LOT. Granted, our home required and still requires renovation which adds to the cost. For something that is brand new and not needing renovation it would be worth it in my opinion to risk purchasing at the top of my budget.
Post # 36
I would never. We are looking at buying land and building at the moment, and we are not going to spend anywhere near what our pre approval would be.
Mortgage stress is not a fun thing. We paid off our first home in 10 years, and certainly plan on doing the same this time.