Is Your Mortgage Too Expensive?

Becoming a homeowner can be challenging. While everyone wants to have homeowner bliss once they move in, that may not always be the case. When you buy a house, you typically feel pretty secure with your flow of income. However, some unexpected events can occur and mess up your plans. A reduced income amount may affect your ability to handle home repairs,  emergencies, or any of your other bills.

According to the Department of Housing and Urban Development (HUD), affordable housing is no more than 30% of your take home income. If your income changes and now your housing costs account for over 30% of your take home income, you are now considered cost burdened. Being cost burdened is not pleasant and can cause a lot of unnecessary stress in your life. That is why there are some ways to handle this situation if this happens to you!

Figure Out What Happened

Surely you considered the financial aspects to buying a home before the purchase. So you shouldn’t have ended up here without a big change. Regardless of the reason you want to understand what is going on. Have your monthly bills increased? Has your income decreased? Did you not plan properly at first and now you are stretched too thin? You need to figure out what happened in order to properly handle the situation.

Understand the Problem

Now that you figured out what happened, it is time to fully understand what’s going on. You want to get an idea of whether or not the situation you are facing is permanent or temporary. For example, if you had an unexpected expense that you needed to pay, you may only be short cash for just a month. Let’s say your job decreased your pay temporarily when they were going through a period of decreased profit. That may affect your income for a few years before the company is financially able to get your pay to where it was.

Problems can come in all shapes and sizes and can last however long. You want to get the scope of the issue so that you can properly handle whatever you are facing! When you are cost burdened you can limit your ability to reach other financial  goals like handling debt, growing your emergency cushion, saving for retirement, and more.

What Can You Do?

While nobody likes to hear it, you may have to make sacrifices during these difficult times. You should consider this if you do not want to sell your home preemptively. How you choose to make sacrifices is entirely up to you.

You could spend your free time with a side hustle, you can change careers altogether, or even limit yourself to a strict budget. When you take the time to make these sacrifices you may be able to boost yourself to a better financial standing.

Consider Selling Your Home

A lot of thought goes into buying a home. Blood, sweat, and tears may have gone into getting to the financial position to take on a house payment. Unfortunately, things change. It will be a difficult decision deciding whether or not you should sell your home. However, it is important to not let your pride or ego get in the way of making a smart financial decision. If you sell your home then you may be able to actually better manage your finances overall.

There are plenty of aspects to think about when making this decision. If you do decide to sell  your home, you will need to get into contact with a realtor. The realtor will begin the selling process ASAP. How fast you will be able to sell your home depends on the housing market. The longer you wait then the more you could jeopardize your budget.

Try to Avoid a Foreclosure

A lot of people think that foreclosure will never affect them. “I’ll be responsible with my payments!” But sometimes life can be unexpected. You want to make sure you do not miss your payments to the point of foreclosure. It is important to take proactive steps to ensure your situation doesn’t get this bad.

Sometimes you may be in a tough spot. You may need to discuss alternative options like a short sale. If a bank accepts an amount for the home that is less than the mortgage then that is a short sale. Not every home can apply for a short sale so you will need to see if you are eligible.

Try Changing Your Location

The area of your home affects the price greatly. It may make sense for your budget to relocate jobs in order to relocate your home. When looking at areas to live, you need to keep your lifestyle in mind. If you need to be at work constantly then you don’t want to live in a home that has a long commute. The same idea applies to making sure the area has aspects that you like as well besides the affordability!

Be Proactive

If you find yourself in this situation, you need to reflect. Once you handle that situation, you will likely eventually look to buy another home. When that time comes, you want to be proactive in your planning. Make sure you account for any and all unexpected costs. You want to set an accurate budget to better prepare your financial situation for another home purchase.

Keep In Mind…

There are some key tips that you want to keep into consideration when dealing with a mortgage.

First, make sure you have a responsible budget. You want to make sure that your payments do not exceed 28% of your gross pay. This will allow you to maintain the goal of affordable housing.

Secondly, make sure you plan properly. Besides a responsible cost portion of your budget, you need a responsible income portion as well. Do not plan for income you do not make. Even if your job promises you a bonus, you may not receive it. You do not want to bite off more than you can chew because you expect to make more money.

Finally, you want to make sure your mortgage works for you. It can be easier to plan for a mortgage with fixed interest rate terms. This can help you better manage your budget.

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