Since the 1950s, the American dream has been to settle into a three-bedroom home with a large yard and a picket fence. Unfortunately, houses are no longer the cheap twenty to thirty thousand dollars that they were back then. Instead, most potential home buyers are staring down the price of two houses, and they are forced to decide which one is best.
More often than not, it comes down to price. Although we know the dangers of overspending and being house poor isn’t anyone’s idea of a good life- consider these steps to buying a house.
Do You Expect Life Changes?
Life changes of any sort can affect this decision negatively or positively. If you’re expecting to have a child soon, that could severely limit your ability to afford a home. On the other hand, if you’re expecting a raise soon or getting married, you should be capable of affording a more expensive home after that.
Consider which tangible life changes are headed your way, and how these could affect your home buying abilities. Set up a plan for the next five years to keep track of whether you can afford this home or not.
What Are Your Current Bills?
Look at what you currently owe, and consider if those will change when you buy a home. Will you finish paying off a car soon? Are you going to lose child support? As life changes, economic changes like these should also be considered. Think about your cable, how much your electricity bill is, and how much you spend on groceries.
Although you may feel like lying about your numbers and saying you pay less- it’s better to be completely honest with yourself.
If you’re overspending now, you may still overspend late on when you’re buying a home. Don’t risk foreclosure over not wanting to admit how often you like eating out.
Do You Need The Space Immediately?
How immediately do you need the space of the home you’re considering? If you’re expecting a child, but don’t have any others, you still have a couple of years before your kid will care about having their room. Use those couple of years to bond and save as much money as possible, and you can pay a larger down payment, which will help against your interest rate.
What Would You Do If You Couldn’t Pay?
Using a tool like a home affordability calculator, look at how much you make versus how much you spend in a month. Give yourself wiggle room to enjoy life still, while also getting to have the security and fun of owning a home. If you were unable to pay, you’d need a plan in place so that you could keep yourself from being foreclosed. The best method is to buy a home for far less than your budget, so you won’t have to worry about foreclosure.