Wednesday, August 8, 2018 / by Andy Mandel
It’s been over a decade since the 2007 financial crisis, but there are certain lessons we learned from it that you need to remember before buying a home.
First, you shouldn’t buy a home that costs more than you realistically can afford. Experts say you shouldn’t spend more than 30% of your gross salary on a home. If you make $100,000 per year, for example, no more than $30,000 of that (or $2,500 per month) should go toward paying for your home’s mortgage, taxes, insurance, etc. Just to be on the safe side, it might be a good idea to buy a home that’s slightly less than what you can afford so you’re still in a strong financial position in case disaster strikes.
Second, make sure you have six months’ worth of mortgage payments reserved in your savings account after you buy a home. If you lose your job, a recession hits, or you need to replace an appliance or two, you don’t want to be left struggling to pay for your home.
Lastly, don’t assume you can sell your home for more than what you bought it for. Historically, home prices appreciate over time, but buying a home is a long-term investment. Experts say the best time to buy a home was 20 years ago because the price of almost any home then was lower than what it would sell for today. If you plan on living in a certain area for at least five years, it makes financial sense to buy a home, but don’t buy just because you think you can sell next year and make a huge profit.
If you’d like to talk more about how these lessons apply to you or you have any other real estate questions I can help you with, don’t hesitate to reach out to me. I’d be glad to help you.