Don’t buy too much house.

You’ve saved enough for a 20% (or more) down payment on a home.  You’ve been scanning mortgage lender sites and interest rates along with neighborhoods you’d like to live in, real estate lawyers etc.  So much to do….but first…. check with lenders and get your best rate (which is tied into your credit score, along with your income to debt ratio).

The mortgage lender will let you know, by crunching numbers and information you have provided, and come up with a figure which they say you can afford to pay for a home…a monthly payment including principal, interest, taxes and insurance (PITI). The thing is, it is at the high end of the spectrum, and if you buy a home at that price, you may find yourself in financial trouble….meaning you are buying too much house, thus you will be house poor.

Think ahead.  Are you single? Staying single? Married? Children? No children? Maybe children? Will the answers be the same in 5-7 years? Questions like these and answers for them need to be considered in the size and cost equation of the house you’re thinking of buying.  You want to stay at the very least 7-10 years in a home…maybe more. Maybe it will be the one and only house you ever buy.

Say you’re single, and may find the perfect little house for yourself, or a really nice one bedroom condo, but if you get married, and expect a baby, ohhh, twins… will there be enough room for them and all the stuff they need? Would it be better to buy a home with 2 bedrooms to carry you along so you can stay and grow equity in the house? If you have two bedrooms, while single you can use one as an office/study/den…then should you marry and have even two children, even a boy and girl can share a room while young.

On the other hand, if your family is complete, and say you have 4 children, 2 girls, 2 boys, but ages spaced far apart, if you purchase a 5 bedroom home, before you know it, the kids will be off to college or on their own, and you have a huge house to rattle around in, along with the upkeep of it.  Yes, you can sell it, but some of the ‘McMansions” are hard to sell.

So, think ahead. Go over your budget thoroughly, and only buy a house at the figure you are financially comfortable with paying each month for the next 30 years. And, yes, it can be lower than what the lender says ‘you can afford’.

Remember, you will want to redecorate, paint, maybe a new piece of furniture.  A hammock, picnic table, grill etc. And the cost of yard upkeep of a house means lawnmower, snowblower etc, or landscaper, called HOA fees if you buy a condo.

Get a pre-approval letter from the lender, and bring it along to open houses….do not give it to the realtor there, you keep it, but show it to them to let them know you are a serious buyer who has also gone that one step further to get approval from your lender.  It may be the clincher that gets you ‘the home of your dreams’.

The idea is to buy the nicest house you can, in or near the neighborhood you like, and make it your own…. without using a bigger portion of your monthly budget than ‘you’ can comfortably afford.  You don’t want to have sleepless nights worrying about the large mortgage payment, when a smaller, still perfect house, will serve you just the same.