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How Much Home Should You Buy?

To buy the home that’s right for you and your household, you may already have a dream home in mind. Then reality sets in – you’ve got McMansion tastes on a starter home budget. That’s when it’s time to face the question – how much home do you really need? 

Here’s a better way to start the home buying process. Ask yourself these questions: 

  • How long will you likely live in the home? 

  • How large is your household? Is it likely to grow? 

  • Where do you want to live – near work, near family, in a certain school district? 

You should have a fairly good idea of the number of bedrooms, baths and living areas you want as well as other features you want your home to have. But the trick with buying a home is getting as much as you can on your wish list without becoming “house poor.” 

House poor means you can afford your house payments but you can’t afford to do much else. It’s not a fun way to live, so let your lender prequalify you for an amount you can comfortably afford.  

Lenders have a conforming loan standard that they use as a benchmark for prequalifying you as a borrower. Your debts plus mortgage payment can be no higher than 41 percent  to 43 percent of your gross monthly income. Having a price limit will quickly rule out certain neighborhoods or homes. Then you can concentrate on looking at homes through the filter of practicality. 

Size: Consider operating costs and maintenance. While you may want more space, like most homebuyers, you may find that a bigger house isn’t better if you’re paying big bucks to heat, cool and maintain space you don’t really use. 

Layout: As you preview homes, think about your daily activities and whether the layout functions to serve those needs. Does the interior design allow you to pivot as your household’s needs change? For example, a little used formal dining room or living room could better function as a home office or playroom as long as you have somewhere else to gather at table. 

Materials: As suggested by the children’s story The Three Little Pigs, houses made of brick or stone are the safest, longest-lasting materials. But houses made of siding can be comfortable and affordable. The quality of materials and the workmanship are what matter most. 

Comfort: You want your household members to be comfortable and to enjoy the spaces that they have. Think about places for family and friends to gather. Privacy is important, so there should be spaces where one can be alone with one’s thoughts as well as spaces for gathering. 

Costs:  When estimating your monthly payment, include taxes and hazard insurance, but don’t forget to set aside money in your overall budget for decorating, maintenance and repairs. You may have to install curtains or replace a major appliance.  

Remember, nearly every buyer compromises on something.  Maybe you get a fixer upper instead of a new home. Or, you buy a smaller home in a more expensive neighborhood. Or, you get a larger home in a suburb and compromise on the commute. Prioritize what’s most important and you’ll find some wish list items you can happily do without.