How Much House Can You Afford?

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8 questions to ask when looking at a home

Many people buy a home to get extra space for growing families, changing lifestyles, or to more comfortably host guests. Extra space also makes homes more appealing to buyers when it comes time to sell. Here are 8 questions to ask—and answer—when looking at properties:

Is there enough room for you now and in the near future?
Is the home's floor plan right for your family?
Is there enough storage space?
Will you have to replace the appliances?
Is the yard the size that you want?
Are there enough bathrooms?
How much maintenance and/or decorating will you need to do right away or later?
Will your present furniture work in this home?

As a rule of thumb, ask any questions you have about specific rooms, features, or functions. Pay particular attention to areas that you feel could become "problem" areas—additions, defects, areas that have been repaired.

And above all, if you don't feel your question has been answered, ask until you do understand and are satisfied. In most cases, your real estate agent will be able to provide you with detailed information about each home you see.

It’s better to buy a home than to rent one in most cases. But not in every case. Comparing buying to renting is actually a fairly complicated endeavor. However, there are a few easy guidelines you can use to aid you in your decision. Buying a home is usually more beneficial than renting except when:

You intend to move within a few years
Your rent is very low
You don't expect to live more than another 15 years

Building equity vs. “throwing your money away”

Although it’s often said that by owning a home, you’re not “throwing your money away on rent.” This may be true, but when you buy a home you will still throw money away on things that don't build any equity. These include:

Closing costs
Interest on your mortgage
Property taxes
Property Insurance
Private Mortgage Insurance (if your down payment is less than 20%)
Maintenance

In fact, these “throwaway” expenses are more than you’d likely spend on rent. If the only financial advantage to buying a home were building equity, it wouldn’t be enough to offset these expenses, and it would be better to rent. The reason that buying is usually better than renting is not because you avoid throwing money away, it's because:

You lock in your monthly payment for 15 or 30 years. (If you kept renting you’d pay more each year.)
Your house gets more valuable over time.

Freezing your monthly payments is where the real benefit is. Were it not for this, for many people it would make more sense to rent. This is the gem that makes home buying worthwhile. There are a couple of other advantages to buying:

You can stop making payments when the loan is paid off. This is a big advantage, but it doesn't get your costs down to zero. You will still pay for taxes, insurance, and maintenance even after your loan is paid off. On a home worth $180,000 that could be around $525/mo. Sure, that's better than the $1000/mo. you could be spending on rent, but it's not free.
You can deduct mortgage interest on your income taxes.

For most people this advantage is pretty small, but you can certainly calculate it in your own analysis if you want to be complete.