How Do I Decide How Much House To Buy?

How Do I Decide How Much House To Buy?

Dear Holly,

I have been working really hard and think I am ready to buy my first home. I am getting conflicting advice; some folks are recommending I buy the cheapest thing I can afford in the area where I want to live, others are suggesting I stretch a little and get an extra bedroom and bath. Do you think I should go cheap or go for broke?

Thanks,

Confused about my purchase


Dear Confused about my purchase,

As I am sure you can attest, there is no shortage of advice out there for first time home buyers. The problem is that those giving advice are often giving general advice and not advice based on your situation.

The first thing I would say is ask your mortgage lender.  I never show homes to people unless they have had extensive conversations with their lender and have a good solid understanding of both what they can--and want to--afford. If your lender clears you to go either way, then you need to do some soul searching.

The first question I ask buyers is how long they see themselves in the house. Once I get their answer, I ask them what kind of life-events they anticipate (transfer, marriage, divorce, children, parents moving in) in the next 7 years.  Do they think that any of these life-events will happen during the course of their ownership?

Once they answer that question, it becomes easier to determine what type of property will best
condo building suit their needs. It is different for every buyer.

Especially in a first home, I ask them if there is any scenario in which they can see taking a room-mate (not a significant other, but a paying tenant). If job loss, or loneliness, might lead them toward this option, I find it helpful to evaluate homes for dual, or triple, living capacity. A three bedroom, 1 bath home will be more difficult to rent a room in  than a 2 bedroom, 2 bath home.

Finally, I ask them to be honest with themselves about their income growth potential. If you are in a field where your salary will continue to grow, it is easier to stretch a bit. Down the road, it won't seem like a stretch at all. If, however, like many people you are in a limited income growth job or career, you need to know that your current 'stretch' may become your lifestyle. If that is okay, then you have your answer.

I hope this helps and good luck!

Holly

 

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Comment balloon 4 commentsHolly Weatherwax • June 10 2011 08:37AM
How Do I Decide How Much House To Buy?
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How Do I Decide How Much House To Buy? Dear Holly, I have been working really hard and think I am ready to buy my first home. I am getting conflicting advice; some folks are recommending I buy the cheapest thing I can afford in the area where I want… more