It's often said that a home is the biggest single purchase of our lives. While this is true for most of us, it is certainly not the only big ticket item we buy in our lifetime. Purchasing a car, paying for an education (especially at a private college), weddings, and furnishings for our home are expenses that typically require more than one paycheck. If we plan to retire, much of our income is directed to one or more retirement accounts that we hope will equal more than the value of our home by the time we retire. So, although our home may be the single largest purchase we make, it is just one of many significant financial obligations we take on.
Whether purchasing a property as a home or as an investment (possibly both), it's always a good idea to consider how that financial commitment fits into our total financial picture. Real estate agents are experts in finding properties that fit our needs and mortgage loan officers are experts in qualifying buyers for home loans - but neither is qualified to create a family financial plan for their clients. This financial plan will determine how much we can afford for our total cost of housing, which in addition to our mortgage will include paying for insurance, taxes, utilities, improvements, maintenance and repairs. Even with today's tightened qualifying standards, it is still possible to qualify for a mortgage loan amount that exceeds the amount we want to pay when we consider other current and future expenses.
This is why I recommend that before a home buyer speaks with an agent or a loan officer, they meet with a financial planner to create a family plan. Only a qualified financial planner can help us develop a roadmap that will tell us how much we can spend on all the major expenses in our lives.
As a broker, I prefer to see that clients have not just a pre-qualification letter before we start looking at properties, but also a family financial plan that will determine how much they want to spend, not just how big a mortgage they qualify for.
How much we can qualify for also can be very different than what we should be paying. There are many other factors to consider.
G'morning John. That is some very sound advice that you bring to your clients - and you can be sure that you will hear from them "in-between-moves" Financial planning begins when a child is about 4 - and gets the concept that they have to save for something they would like to own. Waiting has such huge rewards...all too often we instill the instant gratification at an early age, and so it follows - buying a home you've saved for and can afford...a car, a vacation... Cheers, Wendy Betts - Vancouver BC
This is excellent advice John and one very few people follow through with. It is part of the creeping services we, as Realtors® get to discuss with our clients and prospects. Having an understanding of where your money is going gives you a great chance to figure out how to spend the money you get. Thanks for your post.
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