HOW MUCH HOUSE SHOULD YOU BUY?

#housing #RealEstate #OverHoused
Buying a house is never easy, unless you are, say, an investor paying cash.
Most homebuyers need a mortgage, and getting qualified for one is a process.
Peter Dunn, a financial planner, says many people are “over-housed.” It’s a concept of paying too much money for housing, in relation to one’s income. In some areas, housing prices are over the top, and one cannot help paying too much for a house.
But some over-housing is self-inflicted, Dunn says. He wrote about over-housing in a column in the Jan. 18, 2016, edition of USA Today.
He cites the example of Mark and Jennifer, a Midwestern couple in their mid-40s, who decided 11 years ago to build their “family home.”
Mark and Jennifer knew they were pushing the limit of what they could afford, but the bank approved them for a loan. That gave them reassurance, Dunn writes.
“Things spiraled out of control from there,” Dunn quotes Jennifer.
When housing bubbles burst, it’s the over-housed folks who get slammed first. Are you over-housed? Here are Dunn’s pitfalls: if you’ve dumped everything into a house, and have no emergency fund, you could be in trouble. There are also the realities of increased utility costs, home maintenance, homeowners insurance, property taxes etc. If you didn’t budget for those increases, you could be in trouble.
Mark and Jennifer’s home was 2,000 square feet bigger than their previous home. Their utility costs were much higher and, after two homeowners insurance claims, their premiums went through the roof, Dunn writes. Their tax assessment was based on the value of the land alone. When the structure was added, their tax bill tripled, Dunn writes.
Worse yet, the couple hasn’t saved a dime for the future, Dunn writes. If you’ve given up vacations, new clothes and dining out to live in your new home, you are probably OK, Dunn writes. If you’ve given up your current and future stability, you’re in trouble, he says.
Dunn’s rule of thumb: don’t let the bank tell you how much house you can afford. Being house-rich and cash-poor is not a good situation, especially if housing values plummet, as they did in 2008. Your house is a significant investment, but don’t rely on the equity in it to secure your future. You need to be saving and investing regularly.
The folks who have a comfortable retirement are those who lived BELOW their means, and socked money away. If you buy or build a house, make sure your mortgage payment and other expenses leave a portion of your paycheck left over to save and invest.
Taking vacations and dining out occasionally are nice, too, but saving and investing for retirement are a priority.
Of course, there are ways to earn extra money so you can live in that dream house. For one of the best, visit www.bign.com/pbilodeau. You’ll see stories of people who bought their dream home, but not until they had the money – often the cash – to do it.
Remember, too, that homeownership is not for everyone. Though the American Dream may dictate that one owns his own home, give some thought to the life you want to lead before deciding to buy or build. That house could own you, in more ways than one.
In short, do the math before buying or building a home. Make sure the house doesn’t eat too much of your net worth. If you tap out your emergency fund for that down payment, it could come back to bite you.
Just because you think you CAN swing it, doesn’t mean that you SHOULD.
Peter

SILENT ECONOMIC IMPROVEMENTS

#economy
We hear and read that the economy is really improving.
Yet, many of us don’t see it, or feel it.
The reasons may be too numerous to mention all of them, but a few key ones are: you may have lost a good job and gotten a new one, but you are making less money. Many of us had to get back on our feet, sort of, by making less money. That is a trend. Businesses want more and better work, for less.
Here’s another: you had a house. You either lost your house in foreclosure, or you had to sell your house for less than it was worth because you lost your job. Your new job, if you’ve gotten one, pays less, but you had to take a lesser house. What gets you, too, is that some rich investor gobbled up your former house for pennies on the dollar, and is either renting it to someone else in your situation, or has resold it for more than you could have afforded to buy it back. To the investor, the economy is booming. But you don’t feel it.
A third: you were lucky to keep your job that you’ve had all these years. You’ve survived downsizings, buyouts and the like, intact. But you have not had a raise in years. Your costs, for everything, have gone up. You don’t see the boom in the economy. Yet, you are supposed to consider yourself lucky to have survived. Perhaps, it’s the new normal.
For those who already had pretty good means, the economy is improving. They are seeing the recession disappear, and their fortunes return, and even improve. But so many are left in the dust. They have been downsized, resized and even “recovered.” Yet, they may never see anything resembling the life they once had. They were good at what they did, helped their employers do well, but they were forced to find a new life with less.
You start to see signs saying employers are hiring. You check out some of them, and find that the jobs they are hiring for will hardly make you a living, or are part time. Or, perhaps, the jobs not only don’t pay well, they are incompatible with your life. There may be a shortage of truck drivers, as has been recently reported. But having a job that puts you on the road at all hours of the day and night for $50,000 a year just isn’t going to work for you. There was a time when driving a truck paid much better. Those days are gone.
We are starting to read and hear about companies hiring, shortages in certain professions and even new jobs being created. When you check them out, many of them are either beyond your qualifications or they don’t pay nearly what they should. Wages should start to rise in this situation, but they are slow to. Employers still believe there are enough desperate people out there that they can still pay less.
So, if you are not seeing the boom in the economy that many are talking about, you are not alone.
There is good news here. There are many things out there that can provide an alternative to the traditional job. And, they can pay you pretty handsomely. But, as in anything, you have to be a person who wants something badly enough to look at something different.
If you are that person, visit www.bign.com/pbilodeau, and see one of the best.
You can mope, cope and hope. Or, you can look outside what you know, get a desire to change things for yourself and take the plunge. In this new world, others will willingly help you succeed.
Some may want you to settle for less. Don’t settle. Succeed.
Peter

HAPPY THANKSGIVING!

Today is a day to focus on what is good in your life.
Happy Thanksgiving!
No matter your circumstances, there is much good for which to be thankful. Today, we should think about what we have, not what we don’t have.
Particularly in the last decade, we’ve read about, and heard about, a lot of bad things. Many of us have been personally affected by those things. It’s the media’s job to discuss what divides us. It is our job to focus on what unites us.
In the last few years, we saw housing prices plummet. We saw many lose their homes. Though a good many of us have not yet recovered from that, statistics are showing a rise in home prices and home construction. Home sales may be leveling off a bit, but the recent trend has been positive.
That many be of little comfort to those still struggling. But no matter your circumstances, you likely have much for which to be thankful.
If you enjoy a good, special meal today, remember that many others may not. If you are enjoying that meal with others, remember that many others may be alone.
Yes, today, Nov. 28, 2013, is a day to focus on what is good in your life. It’s a day to focus on what you have, not what you don’t have.
It is also a day to think about what YOU are going to do about the circumstantial breakdowns in your life. Those breakdowns may have been beyond your control, but how you repair them is entirely in your control. You have to plan what will come next in your life, then do it.
Your next step may be outside your comfort zone. That’s OK. Do it anyway. Do it afraid, if you must.
If you are looking for a tool that may help you repair any circumstantial breakdowns, visit www.bign.com/pbilodeau. You may look at this tool with some fear, but if your circumstances need fixing, fix them afraid.
Today we focus on what we have — and can have — not what we don’t have. Today, no matter our circumstances, we have much good in our lives.
Be grateful for those, and confident you can fix the circumstances that need repair.
Be grateful, optimistic and fix them afraid.
Happy Thanksgiving!
Peter