This blog post is discussing Myth #4 of “6 Myths of Homebuying,” by Annalisa Burgos of HGTV’s FrontDoor.com.
Myth #4 is “you should buy as much house as you can get.” That is obviously a myth. You never should max out your home budget. You do not want to put yourself in that position where you do not have a backup plan, and you have no extra money at the end of the month to get by. There are 3 things that I want to point out that are important as you calculate how much house you should buy.
1) Household budget: If you do not have one, you need to get one. Regarding your housing expense, you need to think about what you are paying currently whether you rent or own. Consider the cost of maintaining the property and travel expenses to get to and from work from where you are now versus where you might be buying. Other things in your budget that the banks do not take into consideration are discretionary expenses. For example, if you are helping support a family member, or whether you are going to need a new car in the next 12 months–those are all things that you factor in that the bank does not take into consideration until you owe to somebody else.
2) Savings: It seems in this real estate market folks have used some of their savings they had from 4 or 5 years ago for different reasons. Another reason that you should not buy as much house as you can afford is that you need to replenish your savings account, either to put your down payment money back into your savings or make sure that you have 6 months reserves in case something happens like losing your job, or a situation where you have o take a leave of absence from work to take care of a family emergency.
3) Future changes: What I mean by this is, what are you looking at down the road? Are you thinking you might change jobs in the next couple years so that you have more career advancement opportunities? Or you are thinking you might start your own business. Or maybe you are going to go back to get a graduate degree to be more marketable in the job arena or to get a higher paying job. All of these things are definitely going to factor in your home budget and how much home you should get in today’s market.
How about you? Have you pushed your finances so you could get “more house?”. I am eager to hear from you.
You can reply below or email me at Amy@AmyShair.com
Thanks for taking your time to listen to Myth #4. We have 2 more to go, and I look forward to talking to you again soon. This is Amy. Call Amy for your Shair of the Market!