How much money should you spend?
I get asked that a lot. There are plenty of articles on the web and printed ones as well. Most give a percentage, and some even give a dollar amount based upon your income. When you get pre-qualified for a loan it's based on many things; debt load and credit rating are just a couple. They usually give you a maximum dollar amount you qualify, for provided you've been honest. If you haven't, it will come out and you could stand to lose money. Be honest, upfront, and forthright. Once you have been pre-qualified you should go straight home. Turn off TV & radio, set down with your spouse or partner, and begin the next process.
Sit and talk together without outside interference from the TV and Radio. Turn off you cell phones because this is no TV show, and TV shows aren't reality. That is the first thing to remember so turn them off. The amount you have been pre-qualified for is the maximum, not the minimum, nor is it the amount you must spend. Look at your payment and terms of your loan and the length of time your loan is for. Even if you live out from home already, or in a smaller one there is always a start up cost unless your downsizing. Even after the start up cost there is a maintenance cost, and that's every month Cleaning items, personal items, food, reserve fund for whatever breaks, insurance, taxes, rainy day fund, retirement, and money to just have some fun, you know, entertainment fund. Then there are the big expenses like cars and sickness. There is a lot that you must decide upon and actually prepare for. By no way am I advocating rent, only in certain situations should you rent because it's a 100% loss and you are at the mercy of the landlord.
You should be able to go out and eat, if you want to or take in a movie at least two times per month, personally I do neither. Should my wife and I decide to we can, and knowing you can makes all the difference. You should be able to repair either yourself or pay someone when something breaks down, and eventually it will. If you have children figure on doctor's visits and clothing and even if they attend a free public school they still aren't free. If you are young, figure on having children ... just in case. Your insurance and taxes can be financed in but one thing you should know. Even on a fixed rate if you pay your insurance and taxes, your payments will go up because of insurance and tax increases. You will usually be given the option of either paying the difference, lump sum or your payments will be adjusted to cover the increase in taxes and insurance. Your always going to need toiletries and other essential supplies. Unless you are buying in a nudist colony, you will need clothing and if it's a public job that is an even bigger expense, unless you dress like me. You also have to have food. A little publicized fact is that in American over 64% of the children go to bed hungry each night, will yours be one? Many divorces can be traced back to money problems.
Now you have been, if a couple, figured on both incomes. While you must stretch out your neck if both incomes are low compared to housing prices there are other options. If you need 3 bedrooms, but stick built houses are out of range, consider a used, good shape doublewide on a permanent foundation. No, they are not stick built but they are built better these days than in the past and some even better than some of the cheap built house being built nowadays. Bedrooms should be your main focus, you can share a bathroom, people have lived fine doing that for years, at least it's not an outhouse and even that beats in the woods. How much room do you really need, not want. I love the big houses on TV, with expensive furniture, but would I pay to live there? No. Bigger house means bigger electric bills, more to be maintained, bigger insurance premiums and bigger taxes. Even if we look like "we've arrived", is that really where we set out to arrive to? The house we have is fairly large, but it didn't start out that way, we added on. With three daughters and a wife, Biltmore isn't big enough at times, but after they have all moved out, it will be too big. Happiness is not found in a big house, rather misery can be found there if you can't afford to live. Please, let me assure you, with the last breathe, what you have bought will not help you and in fact, may hurt you in the long run.
I usually tell people to make sure, if they can, have an extra payment so that if something should happen to one, the other could still pay and eat. You might be tight but at least you'd have a roof over your head and a full belly. There is nothing that is less impressive than someone that is in debt over their head. Nobody less happy, more stressed, more afraid, more miserable, and more walked on than someone that has overextended themselves. The old adage "less is more" is certainly a fact when it comes to debt. Tear up your credit cards or if you do keep one keep a small one. If you can't afford to buy and pay for all but the largest things like homes and cars, you will probably be able live without them, after all, you've done it so far. Just because the TV said you had to have it doesn't mean you actually do have to have it, they just want to sell it.
Now this is real, the stuff you don't usually read or get told but I'd be less a person if I didn't tell it. Of course I'd probably make bigger sales and maybe more of them, but then again I write from experience. I write not just from a third party perspective, but from my own experience. I've been on both sides of the fence in my life and really don't want to see someone, or be a part of someone being on the wrong side. Life is short, things can and will happen and do. If your too tired, too worried, too job scared, never home ... what's the point? You have just bought a house, you have to make it a home. There is a difference. Ok, so this is not the normal real estate sales information, maybe something you did not want to hear, but it is the truth. I make commission based upon what you spend, and I am saying, please do not spend more than you can comfortably afford.