How much home should you buy?

You are qualified for a new home!  How exciting!!  Should you buy a home for as much as you can?  Home values have been increasing, will they continue to?  

Once you have your mortgage approval, you want to consider your comfort zone in a house payment.  Just because a lender tells you that you can qualify for a $1500/month house payment may not mean you should spend that much. Remember you need to make those payments, not the lender.

One of the questions I always ask people when I am talking to them about a new home is "what are you comfortable with in a house payment?".  There may be several things that we do not consider when qualifying you for a new home.  Here are some things to think about:

-There may be monthly expenses that you have that we do not consider.  We use the items on your credit report, car payments, student loans, credit card debt, etc.  What we do not consider is any medical bills you may have, child care (unless it's a VA loan), auto insurance, cell phone bills. You may be considering a new car – how much will that payment be?  Make sure you think about all your bills and what you spend on food and clothing before you buy a new home.

-You may not be able to save for retirement.  If you max out your house payment, it may become more difficult to save money for retirement.  You do want to keep putting away money for retirement!

-Home repairs – now that you own a home, you will be the one fixing things.  In an apartment, you can call the landlord if something breaks.  Now you get it fix it yourself or call a repairman – and pay for the repairman.  Our dishwasher just broke – luckily we think we can fix it, but needed to get parts.  So hopefully we saved ourselves from having to buy a new dishwasher!  You want to be able to save some money for repairs as we all know that even with a new home, there will be things to fix.

-You don't want to be house poor.  There is nothing worse than not being able to go out and do things (dinner, movies, etc) or not be able to take vacations.  No one wants to work just to make a house payment.

-Draining your savings account.  The worst part of draining your savings to buy a home is that you no longer have that cushion in case something happens.  It's nice to know that if you get hurt or lose your job, you have money set aside to help you make your payments.  

You don't need the biggest house on the block to be comfortable, but you do want to make sure you can comfortably make your house payments and still have money to enjoy your life with! It doesn't hurt to buy a less expensive home and know that you will be able to afford the home and other things that you enjoy doing.

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, NMLS#150953 - Email - Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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