By Matt Starkey
The purchase of a home is one of the more important financial decisions a person will make. But sticker price alone isn’t the only factor to consider when making the transition to home owner. Follow these three important guidelines to purchase a home and keep a sound financial plan.
Guideline #1: Ask yourself, “How much should I spend on a house?” Many factors influence the amount people choose to spend on a home, including size, neighborhood, school districts, and proximity to work. These aspects contribute to quality of life and must be considered. However, other factors such as the amount of cash flow committed to pay the mortgage, property taxes, repair costs, and other expenses will have a bigger financial impact down the road. I have personally worked with clients who stretched to purchase a more expensive home, only to sacrifice in other areas like retirement and education funding because of the amount of cash flow required for the home and related costs.
Guideline #2: Consider ALL your goals when purchasing a house. A comprehensive financial plan that considers all of your important financial goals is critical to achieving success. Owning a home is a common goal shared by most everyone but we must maintain other goals like saving for retirement and sending our children to school. Failing to consider and prioritize all of your goals when faced with a home purchase decision decreases the likelihood that all of those goals will be realized.
Guideline #3: Make an informed buying decision. A good home purchase decision fits into the broader context of a larger financial plan. Understanding the impact of resource allocation from one goal to another allows you to make an informed decision about possible sacrifices needed to purchase that dream house. Consider both your human capital and financial capital. Perhaps you need to make a trade-off like working a couple more years before buying a house in a better school district.
They say when it comes to real estate, it’s all about location. Perhaps you would be better served to carefully consider other issues like how your new home will impact your long-term financial dreams.
For help with questions that come up while buying a new home, schedule a meeting by clicking below, contact Matt Starkey –mstarkey@makinglifecount.com, or call (913) 345-1881.