Last week, I had the good fortune of being able to help a very nice couple purchase their first house. As I was driving to meet them for an appointment, it occurred to me that, in my years of real estate and with plenty of experience working with first-time home buyers in Guelph, they were only the second clients I’ve had who did not elect to push towards the top end of their pre-approval budget. That (in addition to buying a great property) was worth a congratulations – because it’s a very smart move.
This couple was approved for a purchase much higher than they ultimately decided on. And, sure, we looked at properties that were more expensive. We talked about what they would get for their extra investment, in terms of location, amenities, and potential equity gains. But in the end, they picked a home that meets all of their criteria and also leaves them with money in the bank at the end of every month. They didn’t have to compromise – they just approached this purchase for exactly what it was: the first step on the property ladder.
This kind of thinking has become, unfortunately, the exception to the rule.
It’s normal to want nice things. I like shiny objects, too (usually in the form of camera gear, shoes, or purses). But here’s the thing. When you sit down with a mortgage lender, be it a broker or a banker, you’ll go through the application process and ultimately you’ll get a number. “Here’s what you can afford,” you’ll likely be told. In actuality, what you can “afford” and what you are pre-approved for are often not the same thing. Can you “afford” to be house-poor? Having been there, I’ll tell you… it’s not a lot of fun.
As a Realtor, it’s not my job to tell people how to live their lives, but I do try to encourage buyers – especially first-time buyers – to run their own set of numbers and really think twice about buying a property at the top end of their mortgage pre-approval limit. If you push to that spending limit, will you have reserves left over at the end of the month, be it for a rainy day, some emergency repairs, or for that ever-elusive concept… a vacation? If not, you may be heading down the path of living to work – and working to live is a heck of a lot more enjoyable.
Just my two cents – and worth every penny.