When you are thinking about buying your first home, it can be intimidating. All of the questions you have racing through your head. How much should we spend? What is it like to apply for a loan? What will our payment be like? Then, the fun thoughts; what kind of house will I have? What you want in a home and how you will fix it up to make it your home.
As you look at homes, you may decide that you want to be conservative in the amount of money that you spend when purchasing your first home. This might not be as financially sound as you may think? Typically cheaper homes are smaller and you may find that you will grow out of the home quicker than you think? Five years from now may seem like a long time from now, but it will be here before you know it.
Things will change for you in time; you may have children, maybe a different job, and promotions? Who knows? I think it is smarter for a purchaser in today’s market to spend a bit more, as long as you qualify, so you can live in the home longer and be comfortable in your home.
What I am saying is, if you qualify for a $400,000 mortgage, you certainly should not stretch yourself to where you will struggle. Not suggesting that in anyway. However, I do not think it is prudent to purchase a $200,000 home either. You will grow out of the $200K home sooner and will start to want to move into something larger. At that point, you will probably want to sell your home to have the down payment and closing costs to purchase your new home.
Here is where you are going to cost yourself money. Right now, buying your first home, you will have closing fees, down payment and inspection fees. If you purchase too small of a home, and decide you want to move, you will then have to spend money to pay the fees associated with selling your home and buying your next home. The fees can run into tens of thousands of dollars.
By making a compromise in the above comparison, maybe investigate how much the payment would be around a $300,000 price range? The home should be larger, therefore hopefully giving you a “longer shelf life” in your home. If your home is larger you should have more space and be more comfortable for longer in the middle sized home. As homes appreciate over time, the more expensive home will be worth more exponentially than the smaller, cheaper home.
Whatever type of home you decide to purchase, make sure you talk to 3 mortgage lenders to compare interest rates to ensure you get the best rate possible. Maybe speak to a couple of REALTORS® and get a feel for their style, make sure your agent is knowledgeable and your best interests are their priority. This is an important relationship and decision in your life.