If you're buying your first home, you might have dreams of a big one, but you might not be sure if you should bite off that big of a responsibility. Whether you should purchase a big home depends on several factors. Even if you feel you can afford it now, it is possible to become house poor, meaning that your entire life is focused around paying for your home and maintaining it. As you begin your new home search, use the considerations in this guide to determine what size home you can comfortably obtain.
Your Near-Future Budget
Even though your finances look fabulous to banks and your chances of getting approved for the mortgage is great, only you know what your financial outlook really is. Ask yourself some questions concerning your financial future for the next few years before you decide on how big of a house and what size monthly payment you want:
- Do you want kids?
- Do you want to travel?
- Does your job offer room for advancement?
- Do you have an emergency fund?
Lenders often look at your past financial history to determine how much of a mortgage you can afford. This leads people into mortgage payments that they really cannot handle, leaving them house poor; unable to do the things they love or handle emergencies as they come up.
Your Long-Term Financial Goals
If you are hoping for children, there are college funds to consider saving for. You may think that you can use any equity in your home to pay for higher education when that time comes. Typically, this only works if you sell the home and buy a smaller one. Otherwise, you'll be starting the mortgage process over again. It's best to obtain a mortgage that's low enough to enable you to put additional monies in a separate college fund.
The same scenario applies if you want to depend on your home to provide the income you need to retire. Your mortgage payment should be small enough that you can afford a separate account, should you decide to live in the home for the rest of your life.
Your Desired Lifestyle
Decide whether you want to travel or enjoy other aspects of life. A large home that comes with a hefty mortgage payment can leave you sitting at home during your vacation time from work or missing some great opportunities.
Simply put, not only is your mortgage cheaper in a smaller home, but so are the energy bills. This savings can supply funding not only for vacations, but also for the following activities that go along with living a great life:
- date nights
- sport activities
- fancy dinners out
Be honest with yourself about your financial security and your desired lifestyle before you settle on a house. Even a home that is somewhere between the smallest around and a medium size home can help you save money. Ask your real estate agent to show you some houses that feature the amenities you're looking for, at a price you can afford.
For more information, contact Greenways Real Estate & Auction or a similar company.