The only thing worse than not being able to buy a home when you want to is owning a home and not being able to do anything but sit inside because after your house payment, taxes, and household bills, there's nothing left.
Here are a few smart strategies can help you avoid becoming house poor...
Think hard about that pre-approval amount. Just because the bank tells you that you can buy a $400,000 home doesn't mean you have to spend all $400,000. It might be that you're not comfortable with a payment that high if it means you won't have a cushion and can't continue to contribute to your savings.
Things you'll want to consider:
1.) Can you continue to invest the way you want to?
Will you be able to keep up (or build) your emergency fund - "A savings account stuffed with six months expenses or more is a vital part of financial stability," said Money Under 30.
Are you going to have enough money left over to establish a bank account buffer? "Whether you're 15, 25 or 65, if you're having trouble with your money and want to improve, the very first step you should take is to build a bank account buffer," said Money Under 30. "A bank account buffer is another name for what other people may call a cash cushion, mini emergency fund, rainy day fund or back-up savings. When you have a bank account buffer in place, you don't have to worry that a poorly timed Starbucks break you charged to your debit card will overdraw your account and trigger an overdraft fee."
2.) Budget for additional expenses.
This is not the place for that buffer referenced above, but, rather, a way to make sure you can really handle the home you want without living paycheck to paycheck or, even worse, going into even more debt just so you don't sink. If you don't currently have a yard or are renting, you may not be accustomed to paying or landscaping. If your new home has a pool, don't forget to budget for that pool cleaner. If you're moving to a larger home, you may also have an increase in costs for your house cleaning services/supplies and utilities, and if your commute is longer, you may be paying more in gas and tolls. They are the little things that can creep up and affect your bottom line.
3.) Don't do improvements right away.
You might want to wait a few months to see how your expenses pan out before you empty your savings on a new kitchen. Ditto for buying a houseful of new furniture. The desire to fix up the house to your standards or pack it with all-new everything is strong. But a little patience can go a long way. Spreading out your purchases while you increase your savings and waiting for sales and zero interest credit offers can help keep your budget in check.
4.) Be careful with an equity line.
Having equity in your home is great! It means you made a smart investment. But using it irresponsibly can quickly make your budget spin out of control. Accessing equity can be tempting. Making not-so-smart decisions with the money can create a very stressful situation. If you take out a line with the intent of doing some updates or renovations, you'll want to make sure that you can comfortably afford the new payment and that the renovations you're making will provide a return on investment.