Save a Ton of Money (and Potentially Financial Difficulties) by Buying a House You Can Afford

Here's a piece where Suze Orman gives some of her thoughts on protecting yourself from the wrong mortgage, but the part that stands out to me are her thoughts on buying a house you can afford:

I know this sounds un-American, but the best way to keep your mortgage costs in check is to start out with a smaller mortgage. Ideally, this is where I suggest you save up for a nice down payment of 20 percent or so. That's still my best advice, but I know patience isn't exactly in vogue these days.

Here's my second-best advice: buy a less expensive home. That is, a home you can easily handle the payments on, rather than a home that keeps you up at night worrying about the mortgage. That can mean rethinking where in the country you live, or what neighborhood you can afford.

Or reconsider exactly how much space you need. I find it fascinating that the typical square footage of a U.S. home has increased more than 40 percent since the mid-1970s, yet our family size has actually decreased slightly during the same period. A big reason housing is more expensive is because it's so much larger. Set your sights on a comfortable but not king-size home and you'll have a more affordable mortgage.

I think Suze is starting to read Free Money Finance. After all, her advice is getting much better as it's starting to mirror mine. ;-)

Anyway, buying a house you can afford (as well as making a good down payment) is a key part of my formula for buying a house. If you can follow the steps in this formula, you'll have your house paid off in 7-10 years. I know it's not popular (as Suze notes too), but this advice has worked for me and I recommend it to anyone who asks.

For more thoughts on home buying and selling, see these links:

• Save Money When Selling Your Home

• Should You Pay Off Your Home or Not?

• Details on How I Paid My Mortgage Off Early

Comments

[Lord]

I would tell them to make their credit the best possible. Poor credit is enormously costly.

[Chris]

The only way to pay off a mortgage early without refinancing is to pay extra towards the principle. It irks me that someone would sell information that should be free (or trick people into believing there's a special way to do it).

[M-A]

I wish this were a choice here in the UK, but unfortunately the choice is between not buying, or mortgaging yourself to the hilt for a really tiny place. Moreover, the average size of a new property in the UK today is 30% less than it was in 1920 and the average size of a new property here is just 815 sq ft (76sq m).

My husband and I are saving for a nice chunk of deposit, but even with that, house prices are rising as fast as we can save, so our potential mortgage isn't going down.

I wish there was any property that would only need a mortgage of twice our income, but that wouldn't even buy a studio flat or static caravan round here, even with our deposit.