When You Can’t Afford to Buy a House
It’s a situation that many house-hunting millennials know too well. The housing market recently has been extremely high in the United States and incomes haven’t increased at the same rate. It’s becoming more expensive to live and obtain a main part of the American Dream: homeownership.
It’s been the same feeling for my husband, Jacob and I! We recently finished paying off $87,000 of student loan debt. And we decided to pay off debt because of our two big dreams: we wanted to have kids and a house to raise those kids in. So we sacrificed a lot for 2.5 years to pay off our debt quickly!
And now we’re here. Debt free and ready for this next stage of life. But as badly as we want our own home, we know that we need to be in good financial health before we do. Simply put, we’re officially moving out of my parents’ house this weekend and into an apartment while we continue to save.
How Much House Can You Afford?
Financial guru, Dave Ramsey, will tell you that you should buy a house in cash. But if that isn’t possible, a mortgage OK. He says to take out a 15 year mortgage and spend no more than 25% of your take home pay on your mortgage payment.
Dave’s method may make more sense in Tennessee where everything is at a lesser cost. But this doesn’t work well in many other areas of the United States. The rule of thumb that I have been using is taking out a 30 year mortgage with a payment 25% of our gross income. But that still isn’t very doable in today’s market…
If you make a household income of $80,000, you’ll want to spend about $1,600 a month on a mortgage. This is including taxes, insurance and PMI. And if you put about $20,000 down, you’re looking at buying a house that costs around $275,000. And for the area I live in, something like this is hard to come by if it’s not half-burned down.
We ran this calculation for ourselves and came to the same conclusion. There was no house that we could afford. But that’s OK. Sure, we were bummed at first, but now we are super content. We found an amazing apartment that we’re moving into TODAY and can’t wait to make it our home!
So what do you do when you can’t afford a house?
Don’t Sacrifice Your Budget
If you run the numbers and determine that you’d be spending more than 25% of gross income on your mortgage, don’t sacrifice your budget. Don’t bend on your budget to get your dream home. Take a step back and look at house buying with your head rather than heart, and truly make sure that this is a good financial decision.
Sacrifice Your House Standards
If you realize that your house won’t fit your budget, you may have to sacrifice your standards. Maybe you have to look at a house in a different town. Or maybe you have to buy a house that’s of lesser quality. Your dream home may have to wait to be your dream home until you have increased your income or down payment.
Maybe you even decide to sacrifice your living situation to move in with relatives and save more. I may know someone who did that. 😉 And it was very helpful.
You may even move into an apartment to rent for a little bit while you save more! Don’t be ashamed to be a renter. You’re buying patience. I’d rather you rent an apartment for another year instead of wrecking your budget to buy a house.
If your house dreams don’t meet your budget, be patient. It’s hard. I completely get that and feel the same! Many tears were shed recently when we found out that we can’t afford a house right now. We so desire to have a house that’s ours and finally be settled in one place. But it’s going to have to wait.
And there’s even better news. We found a nice apartment that we absolutely love! It’s new, cute, in a great location, and even has 2 bedrooms for an amazing price. We’re being patient with our goals and desires right now so that we can realize our dreams later.
Dreams come true when you’re patient. So give it time. Don’t rush into buying something that you can’t afford. And don’t be down on yourself. Things take time. And if affording a house is your dream, you’re going to get there in the future.
So be patient, stick to a budget, and keep at your goals.
Let me know in the comments below!
How have you dealt with being patient when you really don’t want to be?