“If people have their heart set on something, inevitably, if they can’t afford what they really want, they buy the next best thing. That’s absolutely the worst thing you can do. Not only do you not get what you want, but it sucks you dry.”
– Michael Kalscheur, a financial planner with Indianapolis-based Castle Wealth Advisors, who advises home buyers to either find their dream homes (if they can afford them) or starter homes, but nothing in-between. Kalscheur is one of several planners quoted in last week’s New York Times article on the “seven new rules for the first-time home buyer.” (Hat tip to the Brownstoner blog for the link.)
Kalscheur’s reasoning? Entry-level homes will save buyers more money each month after making the house payment than slightly fancier homes would, making the truly perfect home more attainable further down the road (provided the buyers are actually spending and saving wisely in the meantime).
Other tips from the article: “Put 20 percent down,” “get a fixed-rate mortgage,” and “don’t spend more than about 35 percent of your pretax income on mortgage, property tax and home insurance payments.”