The truth is, most of us don’t need a huge house to live comfortably and buying a small home could give you a more stable footing financially.
For the last few months, mortgage rates have been steadily falling, but homebuyers are not the majority of the gains in the market, it was mortgage refinancing.
The main reason is affordability. Mortgage rates going down doesn’t mean homebuyers can afford the down payment for a new home.
Be tactical and buy a smaller home
Be proactive in using a mortgage calculator so you can visualize how much home you can afford.
This could be really helpful, especially with big metropolitan prices. Flexibility is the key.
When you spend less than what you’re making you will have more reserves for:
- Savings for retirement
- Saving for vacations
- You’ll have more room for a renovation fund
- Business opportunities or other investments
It’s always nice to have savings and investments as a source of funds for emergencies, home renovations and retirement fund. And, as long as your steady with this conservatism you’ll have plenty of money set aside to fund these accounts.
According to a Harvard study, affordability of entry-level homes is the primary factor that affects housing market entry. Especially in big metropolitan areas.
Buying a smaller home in an area that you like is not a big compromise. Actually, you come off a winner in the long run and save more towards your retirement.
Smaller homes cost less to cool in the summer and heat in the winter. If it needs a new roof, a smaller area to replace will save you even more, savings will go the same way with other areas of the house.
If you can DIY small tasks, it would be a plus and increase the value of your home. Home networking will be an easier task to take advantage of since your working on a smaller footprint.
Focus on the savings and practicality
It does not make sense to live more than 50 miles away from where you work. Schools and commute times will be a big factor for you in the long run. There are a lot of factors to consider, but sticking to your primary goal of affordability to have more savings could benefit you greatly in the long run.
The key is to find the sweet spot and don’t rush. You need to afford the down payment and not be house poor after moving into the house.
Summary
Buying your first home is a big leap in responsibilities after being a renter or living with your parents. But by being more practical having a home even in the bigger cities could be achievable. Focus on the savings that you can have to set aside on things that matter most in the long run.
