Tuesday, May 24, 2011

How much house to buy

As Islena and I have been looking at different homes to rent while we save up and pay debts in preparation to buy a home, we started talking about how much to spend on a rented home.  We want a nice rented home, but we don't want it to mean we'll be renting longer because we can't save as much each month because the rent is high.  Anyway it seems kind of backwards to me to be getting a rented house and then thinking about savings.

So we made up a little budget.  IT IS SO HELPFUL to have a budget!  Now we have an excuse to go for a less expensive rental.  We're looking for something in the 800-1,200 per month price range.  But our planned 3 years of saving up for a house will include more money for cheaper rentals.  If we go 1,100 per month, that's an extra 3,600 towards a home down payment after 3 years.  If we go 800 per month, we'll have an extra 14,400 towards our down payment in three years. 

As Islena reminds me, there are a lot of other variables to look at when choosing a rental house.  Schools, church location, distance to work/university, crime rates, neigbors, neigborhoods, climate, safety from natural disasters like floods or earthquakes, child-play options like a nice yard, parks, and pools, etc. 

It really seems to me that many of us look at the house and car buying experience backwards.  We see how much we can get, when we should be doing our best to figure out how much we really need.  I personally am all about less house and more vacations.  I'm so excited to get our savings going!  Saving for retirement, emergencies (3-6 months of income) house down payment, $1 per day for each kid (about $100 per month for us), vacations, etc. 

They say that you can only afford to buy a home that's 2-3 times your annual income.  Apparently everyone goes with 3+ years...  3 years for us would be about a $225,000 house.  But I think we can get a decent one for about $150,000.  I would love to learn how to do needed repairs, and by the time we're buying, Franklin will be old enough to help out some.  It would be good to work with him.  I'd love to be able to teach my kids some basic construction/home repair/upgrade skills. 

Islena and I are watching a lot of HGTV.  She likes the 'home buying' programs.  I like 'Holmes on Homes' where they go in, find problems, and fix things the right way.  There's a lot of technical talk that goes over my head, but I never see an episode without learning a few things I didn't know.  Very cool!

My advice when thinking about how much house to buy is the following: don't think about how much you can get, think about how much savings you can get, whether for vacations, retirement, kids, charities, or whatever. 

1 comment:

JC said...

Good advice Jeff. Thanks.