Written by Jaymi Naciri
We’re told to be practical with our real estate purchases. Be cautious. Be smart. But what if the smartest move is the one that puts you in the home you want, not the one you’ll settle for because it’s a safer bet financially?
Will you work harder to protect your investment? Cut back in other areas to be able to afford it? When it comes to goal setting, doesn’t a dream home represent the ultimate prize?
“When I buy a house of my own, my wallet will have to open wide. Why? Because the expense is worth it. A house affects so much of your life,” said First Quarter Finance. “Living in a beautiful house improves my mood quite a lot. Excellent location, fine craftsmanship, and plenty of space… it’s worth spending a few extra dollars in my opinion.”
The monthly payment differential
Now no one is suggesting you go out and buy twice the house you can afford. Banks wouldn’t allow that to happen anyway—at least not without a massive down payment. But upping your budget to account for a better location, a larger floorplan, and the kind of amenities that cater to your upscale tastes can make a huge difference without causing financial ruin.
Principal and interest (P&I) on a $200,000 house at four percent is $954.83 per month. Raise that budget to $250,000, and the P&I goes to $1,193.54. Will that $50,000 make the difference between a starter home and a dream home? Maybe not. But in a first-time buyer market, it can greatly improve the location, the space, or both, and all for $238 a month.
P&I on a $400,000 house at four percent is $1909.66. Opt to buy a $500,000 house instead, and you’ll pay $2,387.08 per month. The $477 increase in your monthly payment can make a world of difference in the house you buy, and how you feel about it.
The term “house poor” sounds awful because it is. If buying the house you want is going to leave you eating ramen and stealing your neighbor’s cable, don’t do it. But if we’re talking the difference between sandwiching it a few days a week at work or going to a Saturday matinee to see the latest blockbuster instead of a Saturday night outing, that’s not much of a sacrifice to love your home.
Money Under 30 makes a solid argument for millennials buying their “forever home” instead of a starter home, but anyone in any life stage can strive for more if they’re willing to make it happen.
Places you can cut back
There are 1,000 ways you can cut to make room in your budget for the home you want. Here are a few that will make an impact.
1. Eating out
A night out in a restaurant is not a novelty. In fact, “Sales at restaurants and bars overtook spending at grocery stores…for the first time ever, according to Commerce Department data released Tuesday that dates to 1992, as reported by Bloomberg.”
According to Forbes, “Americans go out for lunch on average twice a week and spend $10 each time. That means they’re spending $936 annually.” Between two adults, you just found almost $2,000 a year just by bringing your lunch. Will that buy you the estate with the view? Nah. But it’ll get you closer to a home that speaks to you instead of the safe, conservative choice that makes you want to cry.
2. Trade in your car
You don’t necessarily need to get rid of your fancy ride—although it might not be a bad idea to at least consider a model lower if that house is really important to you. You could negotiate a trade for a newer model at your dealership. If you’ve been making your payments on time, you might be able to take advantage of a lower interest rate or a program reserved for preferred customers. Or, if you are currently financing your car, consider leasing. Payments are generally lower, and you might even get an upgraded package out of it.
3. Sell some stuff
Antique furniture sitting in the corner of the garage, old electronics collecting dust in the attic, and old handbags you’re never going to use again can make you money. Check sites like Huffington Post and Country Living to get an idea of the worth of things like antiques and collectibles. Other things might be eBay worthy. Mashable has a list of the “9 Valuable Things You Didn’t Know Are Lying Around Your House.” (Pokemon cards? Really?)
4. Crowdsource it
Have a birthday, wedding, or anniversary coming up? Let your loved ones contribute to your down payment