It's easy to get excited buying your first home. You've been busy cutting debt, building your credit score, and finally you have enough cash for a down payment.
But, hold on, resist the urge to buy your ultimate dream.
Financial experts like Dave Ramsey remind first-time homebuyers to stay cool and remember their first house is just the first. During their lifetimes, they will probably move several times and have plenty of opportunity to buy different homes.
One of the key considerations is how much of your income you should spend on a home. Most advisors recommend that you do not buy a home that is more than 25 percent to 28 percent of your monthly take-home pay. You might qualify more, but what you can actually afford is a different matter. You'll have all sorts of expenses, and goals, with your new house and you want to be able to stay out of financial trouble.
But what happens if you are in an expensive housing market?
You have choices.
The first is to moderate your expectations. Maybe you want that luxury kitchen, but instead of paying a premium, buy a house with a simple kitchen you can upgrade. That will give you time to save more money, and as you build equity in your first house, you will be able to afford more of what you want in your next house.
Next, consider suburban locations. If you are willing to take a longer morning commute, you should be able to find much more affordable homes. In smaller cities within an hour of an urban area, you'll find price dramatically less expensive.