How much house can I afford?

Real Estate Agent with Paula and Company Realtors

Only you can truly answer that question.  As you look at the prospect of a home payment it may seem quite daunting but here are a few things to consider.

Home prices historically have risen about 6% a year.  Meaning the home you are purchasing may be one of the best investments you make and as your investment grows you are able to enjoy the comforts of your home as well.

 The primary vehicle to retirement security for many has been their home.  The US savings rate has steadily declined from almost 10% in the 1960s to zero in this decade.  The counter force to this for many has been the appreciation of their home.  Home equity has been the saving grace for many a retiree.

One of the final things to consider is this.  Your house payment will be fixed.  Your rent is not.  Each year your payment will seem smaller and smaller.  As time goes by your salary will go up.  Prices of most things you buy will go up but if you have a fixed rate loan your payment will be the same.  So in a way you are locking in the price you pay for a place to live for 30 years.  After that of course you will be paying nothing.  Imagine now two peope who had a choice to buy a house or rent 30 years ago.  The price to rent or the payment to buy would be about the same.  It would have been about $200.00 for the average house.  Flash forward 30 years to 2008.  The guy who chose to rent would now be paying about $800.00 with an infinite number of ever increasing rent payments to go. The guy who bought a house would now be making his last payment of $200.00.  Which guy do you want to be?

Comments (11)

Marcy Fedalei
Keller Williams Realty - Spartanburg, SC

Great start on ActiveRain! Welcome and thanks for sharing your thoughts and ideas.

Dec 03, 2008 10:28 PM
Janice Roosevelt
Keller Williams Brandywine Valley - West Chester, PA
OICP ABR, ePRO,Ecobroker

This is exactly the kind of good basic information we need to be reminded of constantly - refraining all that bad hype ot there. Thanks.

Dec 03, 2008 10:35 PM
Yvette Gardner
Keller Williams Realty, Spartanburg, SC - Spartanburg, SC

Welcome to the Active Rain community. This is a great site with lots of information.  Have fun with it and hope to see more of your blogs soon! 

Dec 03, 2008 11:09 PM
The Trumm Team Omaha Homes for Sale, Real Estate
Keller Williams Greater Omaha - Omaha, NE

Welcome to ActiveRain!

If you would like a few tips on getting the most out of ActiveRain, please visit my blog Welcome to Active Rain.  It has a few simple steps of what to do now that you have joined.

If you ever have any questions, just let me know.

Troy Trumm

Dec 03, 2008 11:47 PM
Dan Magstadt
Paramount Residential Mortgage Group, Inc - Lake City, FL

Congrats on your first post - Welcome to ActiveRain!!


Dec 04, 2008 01:59 AM

I would say a little misleading as taxes go up every year and your net payment would increase...granted maybe not as much as rent, but then again, maybe it would? 

Dec 04, 2008 06:29 AM
Sandy Childs
Keller Williams Realty - Spartanburg, SC
Realtor - Spartanburg, SC

Congratulations on joining Active Rain. This is a great professional networking site. Hope you enjoy this site as much as I do.

Dec 04, 2008 09:46 AM
David Painter
Keller Williams Realty - Spartanburg, SC

Good to have you on Active Rain.  This is a good site for gathering information and interesting to see what others are blogging about.

Dec 04, 2008 10:15 AM
Keith Elliott Jr
KEIRE Realty Group - Manassas, VA
Principal Broker/Owner

Hello Joel,

Welcome to Active Rain and congrats on your first post! The opportunities to learn and network are incredible here. Best of luck to you!


Dec 04, 2008 03:28 PM
Portsmouth NH Real Estate Agent - Rebecca Skane, Realtor®, e-PRO®
Keller Williams Coastal Realty - Portsmouth, NH

Now this is a perfect post which should be added to the newest group Advice for Buyers.  You should join and add some of your wonderful advice posts.

Dec 26, 2008 03:14 AM
Vincent Tedeschi
Weichert,Realtors - Long Valley, NJ

There are very few reasons to rent over owning. The modest growth and stability alone I feel outweigh any risk. People will realize that this was the best time to buy. Hindsight unfortunately is 20/20.


Dec 26, 2008 07:59 AM