“While our original $150,000–$170,000 price range would have put our housing costs at a manageable 30% of our total income, springing for a $200,000 loan shot that number up to just shy of 50%.“
For many people, a logical step after completing college is often purchasing a home and inching closer to the American dream. And yet, there are pitfalls to obtaining a home that can lead to financial stress and the inability to reach important short-term and long-term financial goals.
This article describes how one couple took all the right steps to prepare for a home purchase, but eventually decided to purchase a home that cost more than they planned to spend on housing. The reason was simple: They fell in love with a home that was too expensive when compared to their total income. The article continues to describe what happens next in their attempt to regain their financial health.
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You may want to use the information in this blog post and the original article to
- Stress the necessity of preparing a realistic budget that reflects mortgage payments, insurance, taxes, repairs, etc when purchasing a home.
- Share the advantages and disadvantages of owning versus renting a home.
- Given your goals and lifestyle, how important is home ownership to you?
- What steps should you take to prepare for purchasing your dream home?
- Assume you have found your dream home and you can afford the payments, insurance, taxes, repairs, etc. What steps are necessary to negotiate the purchase and obtain financing?