Home prices are at an all-time high this year, and purchasing a house can lead to financial trouble if one isn’t prepared enough for it. One way to prepare yourself for such a big purchase is to change your lifestyle.
Our lifestyle can dictate how much we spend every year. You certainly don’t want to live a bombastic lifestyle if you’re in debt or if you’re purchasing a home. You’ll need to make subtle changes in how you live your life if you want to buy your dream home this year.
However, you must consider whether it’s better to rent right now than buy a home.
It Might be Better to Rent
Before we get started on the lifestyle changes, you should adopt them before buying a house. You’ll have to consider the fact that it might be better for you to rent.
Many people and families rush into buying a home, not knowing whether if it’s for them or not. Don’t be pressured by society or anyone else. Instead, make sure you have some clarity and peace of mind before purchasing a home for your family.
One way to know whether if it’s better to rent is by calculating the price-to-rent ratio in your preferred state.
Price-to-Rent Ratio
Price-to-rent is an essential equation for those who are looking to buy a home. This equation is all about determining whether if you should rent in a preferred state than buy a home.
In some states in the U.S., such as San Francisco and New York, it’s much better to rent than purchase a home. This is because their price-to-rent ratio is above 21. If you’ve noticed, homes and apartments within these states cost more than a million dollars, and they are much smaller than average homes in the U.S.
Calculate the price-to-rent ratio in your preferred state before you purchase a home. You can have much higher savings this way.
Debt-to-Income Ratio
Another ratio you should keep note of is your debt-to-income ratio. Since most homebuyers in the U.S. use mortgages to purchase a home, it’s essential to know how much debt you’re willing to take, given your income right now.
The debt-to-income ratio can help you determine that. On average, your estimated debt payments, including your mortgage and credit cards, should not reach 43% of your monthly gross income. This is how many lenders will determine whether if you can take a mortgage or not. If you’re above the 43% mark, then you shouldn’t purchase a home just yet.
Let’s say that your price-to-rent ratio in your state is lower than 15, and your debt-to-income balance is within the healthy 20% mark. What should you do next? Well, it’s as simple as looking for a home suitable for your lifestyle.
Looking For Suitable Home
You might not know what’s a suitable home for you until you know when to settle down. First, you’ll have to consider where a good house or real estate for sale is and whether if it’s inside a safe neighborhood. You should also think about your commute. Will it take too long for you to get to work? Will you spend more driving your car than commuting?
Sometimes it might be wise for you to change your lifestyle to cater to your new home. For some people, it might be easier to transfer jobs. For some, it might be easier for them to start a family the moment they’ve found a home. It’s all about your preference and planning.
Limit or Stop Traveling
We can’t stress this enough, but so many millennials continue to spend their money on traveling when they’ve purchased a home. Stop traveling once you’ve purchased your home. The expenses will be too much to handle, and you’re likely to lose a decent amount of your monthly gross income. If you don’t want to lose your home, stop traveling.
Don’t Personalize During the First Five Years of Your Purchase
Personalization is so important for today’s generation, but it’s one of the biggest mistakes they make when purchasing a home. Do not personalize or renovate the moment you’ve purchased your first home. Don’t think of even doing it in the first five years of your purchase. Instead, save money or invest, so you’ll know you’ll be safe from debts in the future.
Maintenance
Lastly, keep track of the maintenance of your future maintenance by following the one-percent rule. This rule indicates that you should save one percent of your perceived home cost every year. If you can’t do that, then it might be better to purchase a much cheaper home instead.
Our lifestyle plays a big role in whether if we can afford a home or not. If you don’t think that you can adopt this lifestyle the moment you’ve purchased your first home, then you should probably not buy one this year.
