Can I Afford a Bigger House
It's exciting to dream about a bigger home, but thinking about the financial part of it might not be. As families grow or you get a new job and earn more money, your house is one of the first areas you might consider upgrading. But a change in housing can have a big impact on your family's financial health, so you'll want to be sure you're ready to pay for both the cost of a new home AND the moving process to get you there. We've got a few tips to help you bring your dream to reality.
Review Your Budget and Finances
Look at your income, expenses, debts, and savings account to see how much you can afford to spend on a bigger house. Remember, a bigger home means bigger bills and more expenses, so take a hard look at your budget and decide if it's a good move financially. If you can, take the extra amount you can afford and put it into a savings account so you can see how a bigger payment would affect your life. This way, you can do a test run to see if it's really something you want to do, and you'll have some money saved up to put toward a down payment or new furniture when you move into your new house.
Save for a Larger Down Payment
A bigger down payment helps to keep your mortgage payment manageable and could help you get a better interest rate on your loan. Do your best to save at least 20% as a down payment for your new home to avoid paying private mortgage insurance (PMI), whether that's through saving or the equity in your current house.
Improve Your Credit Score
The higher your credit score, the better. Pay your bills on time, pay down your debt, and correct any errors on your credit report before you submit your application. This will help smooth the application process and prevent any surprises when your credit is pulled. If you want to boost your score, check out our article How to Increase Your Credit Score to 800.
Signs You Need a Bigger Home
We already mentioned a growing family or a new job, but what other signs might you consider? If you have an active social circle, having more space for entertaining might be important. Other signs might be running out of storage, needing a dedicated office space to work from home, more privacy, or more space to do what you love. If you have hobbies like woodworking, quilting, or pottery, buying a home with the space you need to do the things you love can be worth it.
Benefits of Buying a Bigger House
The biggest and most obvious benefit is more space for both living and storage. No one likes living in a cramped house, after all! Other advantages include the chance to accrue more equity, having dedicated spaces for your hobbies or work, and more privacy that comes with more space. You'll also have more space for guests if you have family or friends that visit from out of town.
What to Do After Deciding on a Bigger House
If you've decided this is right for you, below are a few steps to make your move.
- Explore Interest Rates and Mortgage Options
There are 4 different types of home loans, so do a little research to see which one fits your finances the best and talk with your loan officer to help you ensure that's the best choice. Compare interest rates and loan terms of different mortgage types. Then, ask your loan officer to crunch some numbers and understand how much you qualify for and any applicable costs (and ask about getting pre-approved or pre-qualified while you're at it).
- Prioritize Needs but Consider Trade-Offs
What do you need in a bigger home, and what might be less important to you? Some features in a house might be essential, like a walk-in closet, and others you might be able to live without, like a big backyard. Compromising certain things or locations can help you stretch your house budget and make a larger home more affordable.
- Budget for Added Expenses
Try a dry run to see if you're comfortable paying more for your mortgage, insurance, and utilities in a bigger home. This way, you can get used to paying more and beef up your savings account at the same time. Win-win! Then, you'll already have funds ready for your down payment, moving costs, or new furniture after you move in.
- Watch the Housing Market
Look for fluctuations in interest rates, house prices, and the move to a buyer's market. Sometimes, waiting for a more favorable market can help you afford the home of your dreams.
WaFd Bank is Here to Help
When it comes to getting your finances in order for the ups and downs of life, a little planning goes a long way. Whether you're a seasoned budgeting pro or new to saving (check out WaFd Bank's account options while you're here), your local WaFd Bank branch is available to help you reach your financial goals. Open an account online, visit your local branch, or give us a call at 800-324-9375 to learn more and open an account today.
All loans subject to credit approval.
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