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Should You Buy a Bigger Home?

Conventional wisdom suggests that buying a home is a long-term investment, and that you should buy as much home as you can possibly afford. The biggest advantage to going larger is that you have less need to move up and you aren’t spending money on moving and transaction costs every few years. 

To choose the right home, you have to see as far into the future as possible: 

How long will you likely live in the home? Build savings and equity by staying at least five to ten years or longer. 

How large is your family likely to grow? Children, aging parents? 

What are your space requirements? Need more room for a home office or art studio? 

Where do you want to live? Your neighborhood choice could mean a bigger or smaller home.  

All homes are unique, but to help homebuyers and sellers navigate the market better, most listings will include the square footage. Generally, more space costs incrementally more, but not always. If a home needs work, it will likely rise in value once you make improvements, so you’ll be getting more space at a discount. 

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. That’s why lenders have a conforming loan standard that they use as a benchmark for prequalifying you as a borrower. This is true whether you’re a first-time home buyer or a millionaire move-up buyer. 

To qualify for a 30-year fixed- rate conforming loan that is federally insured, your income to mortgage debt can be no higher than 29% to 31% of your gross annual income.  If you gross $3000 per month, your house payment (principal, interest, insurance and taxes) should be no larger than $870.00. If you’re carrying credit card debt, student loans, or pay child support, your total debt service including your house payment can be no larger than 41%, or about $1,230.00. To qualify for an $870.00 house payment, your debt service can be no higher than $360 per month. 

Qualifying to buy a home is the most important step in determining affordability but keep in mind that with a larger home, other costs will also upsize. Make sure you can or want to handle the costs of higher utilities and greater responsibilities for housekeeping, lawn care, repairs, remodeling or other updates, and ongoing maintenance, plus the occasional big- ticket item like new appliances or roof repair or replacement.