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When you buy a home, you’ll spend hundreds of thousands of dollars on your property over time. Getting a mortgage and making that purchase is most likely going to be the biggest financial decision you make. You want it to be the right one.
That’s why it’s so important to avoid mistakes that could leave you with regrets. To make sure you don’t find yourself in a situation where you wish you hadn’t bought your home, you should heed this warning from Dave Ramsey about when your home purchase could turn into a disaster.
Ramsey says this home-buying mistake could leave you full of regrets
According to Ramsey, many homeowners are tempted to make a decision they shouldn’t when they’re purchasing a home — and this could have lasting financial consequences.
“Don’t give into the temptation to buy a home you can’t afford,” he warns. “If you buy that budget-busting dream home, it will soon become a nightmare.”
Ramsey explained that you should set your budget early on in the process and stick to it — even if you end up finding a home that costs a little bit more or even if a mortgage lender is willing to give you a larger loan to buy your dream property. While it’s easy to get caught up in the emotional side of home buying and stretch to purchase a property you are in love with that’s out of your budget, this won’t work out well for you in the long run.
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“Your house payment will become a source of constant stress, and every time the house needs some type of repair (and it will), you’ll feel like it’s the end of the world,” Ramsey explained when detailing why you absolutely do not want to commit to buying a house that’s a financial stretch.
Should you listen to Ramsey’s advice?
Ramsey is 100% correct. If you push your home-buying budget to the limit, you are almost certainly going to wish you had made a different choice.
Buying a house at the top of your budget means that even a slight reduction in your earnings could make your payments unaffordable. If you want to cut back on hours at work after having a family or take some time off to travel, you aren’t going to be able to do any of that. And if you get let go, you may struggle to find a well-paying job to continue to afford your housing costs.
You will also be devoting so much money to your housing payment that other things you may want to save for — like retirement or big purchases — could be out of reach. And you’ll be making your mortgage payment for decades, so you’ll feel cash-strapped the entire time unless you manage to dramatically increase your income.
To avoid this financial disaster, be sure you do stick to a mortgage that’s easy to afford. Your total housing costs should be no more than around 25% of your take-home home pay if you want to be comfortable making your monthly payments.
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