3 Smart Ways You Can Avoid Being House Rich and Cash Poor
Whether you’re looking for your very first house or are thinking about selling your current home for a different one in another neighborhood, house hunting can be exciting and full of possibilities. As a buyer, it can be easy to get caught up in the fantasy of buying your dream home that you may forget about the reality of your budget. Before you fall in love with a home and sign that dotted line, you’ll want to be absolutely sure that you won’t be living beyond your means.
Here are 3 ways you can avoid living a financially maxed-out life:
Stick to Your Budget, No Matter What
Before you even start looking at listings, take the time to develop a housing budget. Factor in your income and expenses for everyday life and see how much you can afford for a new home. This will help you determine how much of a mortgage you can prequalify for and can keep you in line as you begin house hunting. Remember to set aside enough for a down payment, closing fees, home inspections, and other expenses as well.
Allow Wiggle Room
Realistically, your housing expenses shouldn’t exceed more than 30% of your monthly budget. Think about it: do you want to spend half (or more!) on a mortgage every single month? Doing so will cut down on how much you can dedicate toward paying your bills, buying groceries, taking vacations, and even saving for your retirement. Besides, you’ll always want to have enough wiggle room in your budget when an emergency arrives. Yes, when, not “if.”
Sure, it can be easy to cast aside your developed budget as soon as you lay your eyes on the house of your dreams (with the exception of a massive price tag attached to it). But are you going to love that house after a few months of high mortgage payments? Probably not. As much as you might want to live in a beautiful home that’s $50,000 above your budget, think with your head, not your heart, and stick to your budget. You’ll thank yourself after you’ve moved in and settled!
Purchasing a home is undoubtedly an important decision and likely the largest investment you’ll make. The Central Federal lending team is here to help you every step of the way. Stop by the bank or call us at (573) 364-1024 to get started today!