When most first time home buyers get onto the market, they want to get as much house as they can. The idea of finally having the room and rights to fill out space with all of their belongings while also getting to gain equity is too thrilling. This feeling often pushes buyers into the decision to buy as much home as they can afford. Unfortunately, this isn’t always the best idea, especially if their income is unpredictable or they don’t have a five-to-ten-year plan.
Here are some things to consider when deciding how much to spend on your home.
Do You Have Any Life Changes Ahead?
Although having a child is one of the most exciting things in life if you see that in your near future: don’t get a home at the top of your budget. Children are expensive to care for, and you’ll want to do everything you can to support and love them. Unfortunately, a tight financial situation can have you leaning over your house payment calculator instead of enjoying your kid growing up in the home you bought.
Are There Large Changes In What Cheaper and More Expensive Houses Have?
What are the differences between the cheaper and more expensive homes? Is it something cosmetic, like it missing the five-piece bathroom of your dreams- or something more extensive like missing bedrooms you’d find necessary for your family. Think about the differences between the top of your budget and homes that are marginally cheaper.
How Much Wiggle Room Do You Have When You Spend The Maximum Amount?
When you spend the maximum amount and either deplete your savings or end up with a mortgage that restrains your month to month spending: how much do you have left? Most mortgage lenders don’t let buyers borrow in a way that would be impossible for them to pay off. Look at your monthly bills, and try not to get a home with payments more extensive than a quarter of your monthly income.
What Can You Do With The Extra Money?
If a house is twenty, or a hundred thousand dollars, less expensive: what can you do with that money? Think about what wiggle room this decision gives you in your monthly spending and if that’s worth it. Not only does this contextualize how much you’ll be spending, but it also gives you a chance to consider if it’s livable.
How Long Will You Own This Home?
Although, when home shopping, many get an idealist sense of finding a place where they’ll live forever: that’s not always the best option. Buyers, especially if they’re in their twenties or thirties, don’t always have the job and lifestyle security they used to. Be honest with yourself, and consider if you’ll want to sell this home a few years down the road, rather than growing old in it. If that’s the case, you can settle for less land and space, and in return, possibly take the time to develop your equity and buy again later.