It is very tempting to go ‘all in’ on a house you love, and stretch your budget to its breaking point. When you find a house that is the right size, in a great neighborhood, with fantastic bonus features, logic can fly out the window.
This is especially challenging when you’ve been trying to buy a house in Grand Rapids for a long time. Since the market is currently quite hot, homes are moving quickly. The temptation to over-spend on a property is huge.
However, breaking the bank for a ‘perfect’ house is a recipe for financial disaster.
You will be much better served by sticking to a more modest, reasonable budget that works for your finances. Here are several reasons to stay modest as you submit your offers.
1. Emergencies Happen
Let’s face it – life is messy. You get a flat tire at the worst possible moment, and have to pay out the nose for a tow truck and new wheel. Your furnace dies on the coldest day of the year. A huge windstorm blows dozens of shingles off of your roof, and you have to pay to repair it.
If you drop every dollar you have into your down payment, you won’t have cash on hand to handle emergencies. If your mortgage is too large, you won’t be able to refill your savings account.
The question isn’t ‘if’ something difficult and expensive will happen… it’s when.
When you buy a house in Grand Rapids that fits within your budget, these expenses will feel more like ‘annoyances’ and less like ‘disasters.’ And that is very valuable.
2. House Values Do NOT Always Go Up
The brain is wonderful at tricking you into poor decisions. One popular justification for a high home price is that ‘house values always go up.’ If your brain, your realtor, or ‘Joe from Work’ tell you this, don’t believe them.
Real estate works in cycles. Individual markets go up and down all the time, and Grand Rapids is no exception. It is nearly impossible to gauge where the market will be when you’re ready to sell the place. If you pay top dollar for a house, it is very possible to lose money when you sell it. This is especially true when you buy in a hot market.
3. Maximizing Your Payments = Minimizing Your Options
If you take on a mortgage that stretches your budget, you rob yourself of options. Suddenly, that fun vacation to Florida is off the table, because all of your money is going toward the house. You can’t try that amazing new career you’ve been dreaming of, because the drop in your paycheck would result in foreclosure. Your kids can’t go to Space Camp, because there is just no extra money to go around.
These examples seem harsh. However, they are very real.
Financial stress is terrible. And for most people, housing is the single largest expense. Don’t force yourself into a bad situation for the sake of a slightly larger living room or granite countertops.
4. Home Price Does NOT Equal Quality of Life
Many people opt for a more expensive house because they believe it will vastly improve their quality of life. They think that an extra bathroom will make all the difference in the world, or that a larger basement will drastically affect their satisfaction with the home.
It will not.
Beyond the basics, most features of a house are nice-to-have… not make-or-break.
Of course, it’s great to buy a house in Grand Rapids with an attached garage – you don’t have to deal with as much snow in the winter. An island in the kitchen is a great place for storage, food prep, and working on homework. And a guest bedroom is fantastic for hosting out-of-town visitors.
However, it is not worth breaking the bank for these features. You will get much more joy out of a comfortable retirement, a fun vacation with friends, or peace of mind from a healthy bank balance.
So, prioritize your most important home elements. Choose what really matters for you and your family. Then find a house that meets your criteria, and fits within your budget. You will thank yourself!