Consider a Cheaper Neighborhood
It’s wise to be the richest person in a cheaper neighborhood than to be the poorest person in a rich neighborhood. In the cheaper neighborhood, you won’t be surrounded by peer pressure to constantly spend more to keep up with the Joneses. In the expensive neighborhood, you’ll constantly be surrounded by temptations to spend money that you don’t really have. Look to buy in a less expensive neighborhood at first, and if you’re still tempted to move up, save the extra money you’re not spending trying to keep up and eventually upgrade. You’ll save a ton of money by keeping the expensive Joneses at bay.
Consider a Cheaper Part of the Country
Many areas of the country have prohibitively expensive housing costs that can singly devour any extra income that can be made from living in that area. Look at living in another region of the country, even if it means a reduction in salary. If you can buy a house for $200,000 in Des Moines that would have cost nearly a million in San Francisco, you’ll be substantially ahead even if you take a lower paying job. Also, don’t merely assume you can’t find work in your area of expertise in those other areas. Take a serious look at the job markets in some of the less expensive areas and you might just be very surprised at what you’ll find.
Get a Shorter-Term Mortgage with a Lower Interest Rate
The most important number concerning your mortgage isn’t the number of years you’ll have to repay it or the amount of your monthly payment; it’s the interest rate you’ll be paying. The lower the interest rate, the less money you’ll be losing to interest payments over the life of your loan and the more money you’ll be able to keep in your pocket. When you begin to look at your mortgage options, look seriously at shorter-term options with lower interest rates, like a fifteen-year mortgage. While the monthly payments may be higher, you’ll fully own the home in half the time, and by applying many of the other tactics in this book, you’ll be able to handle those larger payments.
Know Exactly What You Can Afford Before You Look
Before you even start looking at the real-estate listings, sit down and take a long and serious look at your finances. What sort of monthly payment can you realistically afford, especially when including homeowner’s insurance, property tax, and upkeep and maintenance costs in the mix? Be realistic in your calculations and know what you really can afford before you even start looking at homes so that you don’t waste your time (and tempt yourself) by looking at houses that are more expensive than you can possibly handle. Doing this sort of serious gut check before you even look will save you a lot of money and heartache throughout the buying process.
Buy On the Low End of What You Think You Need
When you’re out looking at houses, it’s very tempting to push what you can afford and get one of the nicer houses. Don’t—you’ll just be putting the whole thing at risk. Instead, get the less expensive house, which will give you cheaper mortgage payments. Sock the extra money you saved toward home improvements or extra mortgage payments and enjoy the extra breathing room you get from owning a less expensive home. Then, if you’re tempted to upgrade later, you’ll have improved the value of the house, giving you more leverage to easily handle the leap to a better home.
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