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Major purchases – house

For the vast majority of people, purchasing a home is a largest investment you’ll ever make so it’s important to do it right.

First you should do is figure out how much you can afford.  Hopefully you’ve been saving since you started working in anticipation of this day but don’t panic if you haven’t, look into alternate sources of funding such as monetary gifts and using a portion of your retirement fund (warning – you’ll have to pay it back).  Then figure out how much of a mortgage you can afford. It will probably be in the ballpark of 3x your annual salary however the sum of your mortgage plus related expenses (insurance, taxes, etc.) should really be no more than about 25% of your income.  This is realistic.  If you ask a bank, loan agent, etc they will give you a much higher number because, shocker, they get a percentage of the loan, the higher the loan = the higher their commission.  Never buy more home than you can afford.  It’s not sexy but you will be able to sleep at night.

Determine what your priorities are in a house and what you’re willing to compromise on.  Are you willing to have a longer daily commute in exchange for a larger house?  Can you put a little sweat equity into a property that perhaps isn’t perfect yet?  Trying to have it all will only lead to frustration.  Your first home will probably not be your last home.  The important thing is to get your foot onto the property ladder.  You can always start climbing later.

Hire professionals to worry for you.  Assemble a good team – real estate agent, accountant, banker, insurance agent, etc. and let them handle the details for you.  Keep a savings fund specifically for your house because emergencies will crop up and you’ll need to have the money to deal with them.  Finally, bloom where you’re planted and enjoy the peaks and valleys of home ownership.

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