When
people are looking to buy a home their first question is always “How much do I
qualify for?” That’s the perfect place to start your home search but does that
mean you should limit your search only to that price range? Most experts agree
that a home mortgage should not exceed 28% of one’s monthly income but is that
the perfect answer?
Obviously
every situation is different and the person that can best answer this question
is the home buyer themselves. The real answer as to how much you should spend
on your next home has a lot to do with your personality and not only your
finances. What are your personal habits and how much spending money do you need
to be happy? Some people are perfectly content taking their lunch to the office
everyday while others enjoy the luxury of ordering out or eating at the company
cafeteria. The real question is which one are you? No bank can answer that
question for you. There’s no sense in buying the “perfect home” if it means
sacrificing a lifestyle that you are comfortable with, right?
Aside
from personal spending habits there is the question of your future plans as
well. If that luxury home on the hill means that you will not be buying that
boat next year as you had planned you need to decide which is more important.
Do you really need that much acreage to build on, is that 5 bedroom home really
necessary or are 3 bedrooms enough for your needs? Will overextending yourself
affect important future financial goals such as investing some additional funds
into your 401K or saving for your children’s college fund? The bottom line is
that you can’t spend the same dollar twice so you need to make wise decisions.
The
question here is not whether or not you should buy instead of rent. I’ve seen
very few situations where renting made more sense than buying your own home but
I’ve also seen homeowners sacrifice a lot just to pay a mortgage that may have
been bigger than they really needed. I’m also not saying that one should not buy a home for the maximum amount
approved by the lender; I am saying that it all depends on the amount of money
that one needs to live a lifestyle that they are satisfied with.
If
buying that dream home is what will make (and keep) you happy than by all means
go for it! If however you can’t stand the thought of giving up those 5 star
meals at the country club twice a week than maybe a slightly more modest home
will suffice and you can continue to enjoy those things which bring joy to your
life.
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