By Karl Hartley, Broker REMAX Unlimited, Clearfield Utah
I sell real estate. It is what I do. As such, I find that almost every one of my clients that I speak to has a reason for buying a house. It seems obvious, right? They are starting families, changing jobs, downsizing or maybe moving. All of these reasons for buying a home are perfect in their own way. They are the realization of the American Dream and I believe in that dream 100%.
And yet there is something that has been bothering me lately-
Many of my clients seem to be sort of bitter and disenfranchised with the whole American Dream. So I started doing some investigating to see what was wrong. What I found blew me away.
I think home ownership is not making us as happy as it once did because we cannot divorce ourselves from the consequences of what home ownership means…the amount of debt, the struggle to make payments, and the concern over jobs and security. Many Americans are working longer hours for less pay and for many of us, there is a real concern as to whether owning a home is a realistic goal for us. Especially in this time of recession, when we may have seen friends and neighbors lose their homes to foreclosure, we may be hesitant to make the financial commitment of purchasing a home. After all, we Americans spend the biggest chunk of our paychecks on housing.
If we are going to be making such a huge financial commitment, it seems like before we consider where we want to live, it would make sense to consider how we want to live first. I would encourage everyone who is considering buying a house to sit down with their family first and decide how they want their lives to look like. How do they want to spend their spare time in their new home? Do they want to spend their free time in the new home? How will the family use the house? Will it be a gathering place for friends and extended family or will it simply be a home base for future travels? Would you rather spend your money on something other than a house?
Recently I saw that the Federal Reserve just released a report on how to shop for a mortgage. This is the advice it gives:
- Know what you can afford.
- Compare loans from lenders and brokers.
- Understand loan prices and fees.
- Know the risks and benefits of loan options.
- Get advice from trusted sources.
However, if someone came to me looking to buy a house this is what I would tell them to do first:
1) Speak to an honest professional to see if it even makes sense to buy a home. A house is one of the most expensive purchases a person will make. Is this really where you want your money to go? Do you really want to be responsible for all the maintenance and upkeep that owning a home will require? Or would renting a home or an apartment be a better choice for you?
2) Make sure the REAL costs of home ownership won’t get in the way of the things that make you happy. So here is the question: what would make you happier? A 3,300 square-foot 4BR 3BA house or a 2,900 square-foot 4BR 2.5BA house but you get to go on vacation to Mexico once a month? Or you get to go out with friends every Friday night? What if we decided on the things that really made us happy and made sure we had the money to SPLURGE on those things? Sit down and think long and hard about what your priorities are and make sure that your spending reflects them. The scale of the house that you buy can determine your discretionary income.
3) Make sure the house itself (bedrooms, bathrooms, kitchen, features) will support your happiness. Will the extra money you spend on the house with the gourmet kitchen be worth it because you will enjoy cooking meals for friends and family? If so, great! If you don’t enjoy cooking, you might decide the fancy kitchen is just not worth the added expense, buy a house with modest appliances and spend the money you save on a nice meal out once a week. Will you really use that swimming pool or would you rather use the money you save to go to the beach every summer instead? A house is more than just expensive building materials; it is your home where memories will be made, so enjoy it!
4) Buy a house below market value to protect against more recession, or if things get better, increase your financial upside through appreciation. DON’T do more with less. Don’t scrimp and save, but DO save on your home as it is the biggest expense and use your savings to make yourself happy. Don’t be so stressed trying to stretch your paycheck to pay the mortgage that you can’t even enjoy your home.
5) Get the best financing terms available through a great lender and get the best deal through an expert negotiator. Do your homework and do as much research as you can. Get references from people you trust to find the right lender for you. And then make them prove their expertise to you.
What it all boils down to, in my opinion, is that we just need to put some thought into what we what we want our lives to look like before we make a home purchase. If we don’t have a clear vision of what it will take to make us happy, our consumerist culture is more than ready to tell us that we will find happiness only if we buy more stuff. I think we are all smarter than that. So am I telling you to go live in a commune, live off raisins and ride an organic bicycle? Well, if that brings you joy, go for it, but perhaps moderation would work as well.
It only makes sense to evaluate how much of our budget we want to spend on housing and how much we want to spend on what matters most. I believe the extra time you invest in the process will allow you to more fully enjoy your new house. Your home doesn’t need to be an extra source of stress for you and your family. It can be the best decision of your life.
Karl can be reached at khartley@gmail.com
