Buying a real estate property is a big investment that can require a large part of your savings for a down payment and a portion of your income each month as you pay for your new mortgage payment. But buying a home does not need to be a strain on your finances. Here is some money-smart insight to consider when you are buying a home on a limited budget.
Buy a Home With Rental-Potential
When you have a limited budget to pay your mortgage, it can be helpful to consider buying a home that you can rent out to a tenant while you are living there. This type of home would need to include a separate apartment or rental suite, such as in the basement, upstairs, above the garage, or in a duplex's second unit for you and your tenant to have separate living spaces. And depending on the market you live in with home prices and rental rates, the rent you can charge for your income suite may pay for all or a majority of your mortgage payment.
Be sure you do some investigating to find out the market rent rates as you look for a home in each area you search in, as different areas of a city may have varying demands on rent. For example, you may be able to charge more rent for a rental apartment closer to the city than on the outskirts and in the suburbs. Be sure you compare the rent rates to the amount of your potential mortgage payment on a home. Talk to your mortgage broker to get a good estimate of what your mortgage payment will be or calculate your mortgage payment by using a free online calculator.
Also make sure to screen each tenant before you let them move into your rental. Make sure you collect their information on a rental application, check their credit history, do a background check, and verify their employment and income by requesting a copy of their paycheck stub.
Consider a Fixer-Upper
When you choose to seek a home that needs work, you open up your chances of getting more home for a lower price. A home that needs repairs to its interior, exterior, and landscaping is going to be priced at a discount to get it sold. And if a home is financially distressed--meaning the seller needs to sell it quick--this can additionally decrease its price to your benefit.
Buying a home that needs work that you can complete is a good opportunity for you to save on its purchase cost and slowly put work and money into its repairs. For example, if the home needs a yard put in and its interior painted and carpet replaced, you can tear out the old carpet, paint the interior, and work on the landscaping until you save up to buy new flooring. As you can do the repairs or hire a professional to do the work, your dream home will slowly become a reality.