When buying a home most would believe the number one most important thing you need to be focused on is what you pay for the house. Mom and dad who bought their house years ago, Grandma and Grandpa who bought their house back in the early 1980s when housing prices were $40,000 all have an opinion. Here’s the single most important factor you need to be focused on…
If you’re buying a house all cash this advice is not for you. However, if you’re getting a mortgage. the purchase price of the property isn’t that big of a deal, if you have a long-term plan in place. If the plan is to get in and then possibly sell in one or two years don’t buy a house, just keep renting. If you’re going to buy a house and secure mortgage financing in the process and you have a long-term plan in place the purchase price of the property is important, but it is not and should not be the driver of your decision to buy that property. The number one factor? You guessed it –payment.
The purchase price of the property isn’t all that significant if the payment that you’re taking on is well within your budget. The thought process that goes through every home buyers mind is, I’m going to pay XYZ for the house and I’m going to have XYZ payment. Here is an example- you have a home for $730,000 and another for $700,000. $30,000 of spending power can translate to about $200-$250/month of payment. If you know you can afford the extra $200/month work with the budget you have, not the purchase price.
Take into consideration why you are buying a home to begin with. If you’re buying a property for enjoyment for you and your family, a roof over your head, fixed payments, while enjoying a healthy tax deduction and you plan to live in the property for seven plus years, the number one factor should be payment. The purchase price of the property isn’t going to help you make a long-term budget. The purchase price is not going to help you get your financial house in order and it’s not going to help you pay off debt and it’s not going to help you for a future resale. The purchase price of the house only matters initially at point of sale.
Mortgage tip: Remember payment is the driver of long-term affordability.
Ask yourself this question if the extra payment is manageable: “What’s more important- the future happy memories that you’re going to create in that home along with all the joy and magic that comes with those family life experiences or $200/month?” If the payment is more important you shouldn’t be purchasing a house anyway without a $200/month buffer on payment flexibility.
You should be looking at a less price house from the start and realigning your expectations to price point that supports your family financial goals.
Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.