Build Wealth with a Less Expensive Home

Here’s a case for buying a less expensive home than you secretly want.

According to the U.S. Bureau of Labor Statistics, the average American spends approximately 37% of his or her income on housing. Notably, the top 20 percentile earners spend only 29.9% of their income, while the bottom 20% pay 39.9%. So what do high earners know that you don’t know?

If you have a little less money invested in housing, you’ll have more money to do other things, like: 

  • Invest more in your 401K or Roth IRAs.
  • Pay extra on your mortgage so one day you’ll be mortgage-free.
  • Save money to buy another property. Rent out the first home for passive income as renters make your mortgage payment for you.
  • Build or add to an emergency fund.
  • Make improvements without adding more debt or tapping into equity.
  • Reduce debt.

Conventional loan guidelines from Hud.gov suggest that the average homebuyer spend no more than 29% of his or her monthly gross income on housing. If your gross monthly income is $4,167, spend no more than $1,208, which should include property taxes and home insurance.

What if you have current debts? The Consumer Financial Protection Bureau recommends that your debt-to-income (DTI) ratio be no larger than 43% to secure a qualified mortgage – one the lender has done the due diligence on your ability to repay the loan according to government standards. However, many lenders aren’t comfortable with more than 36% DTI and may charge you higher interest rates accordingly.


FOUR THINGS TO DO BEFORE YOU MOVE IN

You’re almost done! All that’s left to do is to pack up and move in to your first real home. Here are a few tips that will make your first day as a new homeowner easier.

  1. Sort your belongings. Moving can be more expensive when you cart along items you don’t really want or need. A great way to do it is to sort and pack at the same time. Think in terms of three piles – keep, donate, trash. Trash the trash and drop the donations off at the first opportunity. Put your “keep” pile into moving boxes labeled by room.
  2. Plan your storage options. Closets, attics and cabinets can fill up quickly, especially if you’re downsizing. Where will the out-of-season sports gear go? What about holiday decorations? What goes in the garage?
  3. Plan your trip. Pack your car with necessities, including first aid, drinks, and snacks. Let each family member choose their favorite items to bring, like blankets, pillows, games, books, and a change of clothes, just in case.
  4. Meet your neighbors. If possible, introduce yourselves to your neighbors before you move. You’ll have a greater sense of belonging on moving day.

Five Safe Strategies for Homebuying

With home prices rising, you may be wondering if now is the best time to buy a home. The answer is always yes but there are ways to buy wisely and safely.

Save for a down payment. The more money you can put down, the better borrowing terms you’ll get on your mortgage. Establish a firm budget. Limit credit card spending and pay down your debts. Put your next raise into savings.

Choose wisely. Your home should improve your lifestyle, but not cripple you with debt. It should serve your household’s needs for at least five to ten years, so consider location, neighborhood, commute times, size, number of bedrooms, amenities and condition.

Buy within your means. Your payment, including interest and taxes, should be no more than 28-30 percent of your gross income or 40-42 percent of your income including existing debt. As your income improves, you’ll be able to meet other life goals, such as growing your family, starting a business, or buying more property.

Buy for the long term. The longer you own your home, the more equity, or ownership, you have and the less you owe the bank. Think of equity like savings you’ll get back when you sell or rent the property some day.

Take care of your property. Keeping your home repaired and updated is the best thing you can do to protect your investment. A home in top condition always sells for more money than homes in less desirable condition.

It always a good idea to research our local communities to get an idea of where you want to live and the price point for the community, then consult with you Berkshire Hathaway HomeServices Select Realty sales professional to map out a game plan.


HIRING AN INTERIOR DESIGNER

Interior designers are degreed and licensed professionals who make your home more functional and beautiful. If your home could use more space, better traffic flow, or an additional room, an interior designer is your answer.  

They save you money. Interior designers can buy appliances, furnishings, and more from “to the trade” vendors. While they charge for their time and/or add a mark up to each item you agree to, you’ll pay about the same for unique wow-factor results as you would for big-box, off-the-shelf items. 

They save you time. The interior designer learns your lifestyle, personal preferences and space concerns. They know the latest products and design solutions, and do the research so you don’t have to.

They help you prevent mistakes. An interior design is like a symphony – every detail should compliment everything else in utility and beauty. Designers give you what you want, but they also expand your tastes.

They have resources. Many design solutions must be customized, so designers have their own go-to teams of contractors, upholsterers, artisans and craftspeople. 

Most designers offer a free consultation to help you decide if you’ll work well together. Contact the American Society of Interior Designers for more information.


THE FAIRYTALE TUDOR

Great Britain’s Tudor reign spanned 1485 and 1603 and was unprecedented in terms of prosperity. International trade led to a great expansion in free-thinking and in home design concepts, including new ideas like the decorative indoor fireplace with a mantle, hand-made rugs from the Orient as table coverings, and built-in cabinets and seating. 

Tudor style is down-to-earth and charming, and many urban homebuyers are enchanted by their asymmetrical designs, distinctive half-timber accents, deeply pitched roofs, leaded glass windows, gables, turrets, and brick or stone exteriors, accented by one or more large brick-patterned chimneys.  The entry is typically a plank style door with a rounded arch and iron hardware. 

Tudor interiors feature lots of wood – wide plank wood floors, wood beams on the ceiling, wood mantles and more. Timber beams on cathedral-style ceilings are usually stained dark in color. Interior walls are textured and painted off-white to mimic plaster. Due to their solid construction, these homes can be easy to update.

Lighten the interior with candlelight bulbs, natural stone floors, colorful rugs and minimal furniture bedecked in plush velvets, tapestries and brocades.

If you believe your home is your castle, the Tudor style will bring you years of comfort and delight.


EMERGENCY PLANS FOR YOUR FAMILY

Do you know what to do when a disaster strikes? Do your children? By creating and practicing an emergency safety plan, you can protect your family when natural disasters happen.

Fires. The National Fire Protection Association advises you to have at least two ways to escape the home in case of fire. Practice fire drills with your children at least twice a year.

Tornadoes. Tornadoes are fast and destructive. The Red Cross recommends the safest shelter for the family as interior rooms, closets, hallways or a storm shelter/basement.

Hurricanes. The Insurance Information Institute suggests learning where the nearest public shelters and evacuation routes are before hurricane season begins.

Earthquakes. Ready.gov says to practice drop, cover and hold-on drills, like getting under a sturdy desk or table, against an interior wall, or in the jamb of a door on a load-bearing wall.

Before disaster strikes, review your homeowner’s insurance and make sure you’re covered for flooding and wind damage. Document your belongings. Keep valuables, important files, priceless photographs in a safety deposit box.  Prepare an emergency kit with food, water, first aid and blankets.

You may lose some material objects, but you’ll keep what matters most – your family.


LOVING THE RANCH-STYLE HOME

All housing reflects the culture and the economics of their day, and the ranch-style home of the ‘50s, ‘60s and ‘70s is a symbol of post-World War II prosperity and an icon of the space age.

The mid-century saw the first real sprawl in communities away from town centers, made accessible by the increasingly affordable family car aided by President Eisenhower’s new highways. Land was plentiful, so most of these single story or split-level homes are situated on comparatively large lots, with kid-friendly front and back yards.

These homes are machines for living, easy and quick to build, and a snap to remodel, with most load-bearing walls located on the outside perimeter. Kitchens always adjoined the garage, convenient for unloading groceries out of the rain.

Mid-century ranch-style homes are ideal for today’s two-income, time-starved families. The only thing they need is a little 21st century flair. Just replace those linoleum floors and Jetson-era Formica countertops with contemporary stone. Install elegant French doors in place of sliding glass patio doors. Raise the eight-foot ceilings to nine or 10 feet.  Hang your flat-screen TV in place of the starburst clock, and buy some stylish retro furnishings and you’re cool, man.


STAGED HOMES SELL FASTER

In a survey released this year, the National Association of REALTORS found that 83% of buyers’ agents reported that staging helps homebuyers visualize themselves living in the home and influences them enough to make higher offers. Sellers’ agents agreed that staged homes sell faster and for more money.

These are just a few of the advantages to staging your home, but there are other benefits for home sellers. 

Staging gives you a deadline. Getting your home ready to is a lot of work, but online photos and agent showings should showcase your home at its best – decluttered, freshly painted and staged with fresh new furniture and accessories.

Staging gives you great ideas. You’ll learn a lot about making rooms flow, creating focal points, increase and improve lighting, and how to use color.

Staging helps you decide what to keep or discard. If your furnishings are hand-me-downs, out of date, or not your taste, why take it all to your next home? Staging can help you separate what you love so you’ll have far less to move.

Ask your Berkshire Hathaway HomeServices Select Realty sales professional if staging is part of their service or to recommend a good stager.


HOW TO CHOOSE NEW KITCHEN CABINETS

Cabinets set the style for any kitchen, and with advances in functionality as well as beauty, your new cabinets should transform your food prep workspace.

All kitchens have trouble spots that can be fixed with the right design. Hire a certified kitchen designer, who’s adept at space planning, traffic control and up to date on the newest products.

The most popular cabinet doors today are flat fronted with hidden hardware for a modern esthetic. Look for “quiet closing” cabinets that close softly to prevent slamming. Storage that pulls down, rotates or lifts up can save your back and the need for a stepladder. Drawers that pull out under countertops are easier to use than shelves because you can see everything that’s stored. Cabinets that reach the ceiling can accommodate items you don’t use daily, like holiday dinnerware.

Many new kitchen cabinets come in various wood grains and stains, factory-painted wood, and porcelain or laminate fronts. Island cabinets often feature a contrasting color to the wall cabinets. 

Be open to new products that can save you valuable time, such as built-in drink stations, refrigerated drawers and large trough sinks. Visit kitchen showrooms with your designer for more inspiration.


How Important Is Square Footage?

square footage

Buyers tend to think bigger is better, but a smaller home may actually feel more spacious than a similar home with a larger footprint. That’s what makes the emphasis on size over livability so frustrating – it’s not really an accurate gauge for living space.

Living space is roofed, enclosed, heated, cooled and finished out. But, because there is no accepted standard way to consistently measure interiors, square footage is typically measured from the exterior of the home as length times width. This is so that banks, tax appraisers, roofers, painters, real estate professionals and others can have a handy number to enable them to commoditize, price and negotiate homes and services.

Interiors are always smaller than exterior square footage suggests. The thickness of the exterior walls, insulation, wall boards and sheetrock can vary. Some spaces aren’t for walking around, like the empty space beneath stairwells, or the code-required space around water heaters and other systems.

If you’re shopping for a home and see descriptions online, you know there’s a lot of difference between 3,400 sq. ft. and 1,400 sq. ft., but a few feet more or less between similar homes doesn’t matter. If the home’s interior is well-planned, spaced appropriately, furnished wisely, and clutter-free, it will feel like there’s more living space.

If you’re selling a home, your Berkshire Hathaway HomeServices Select Realty professional can help you find ways to make your home appear more spacious. You can start with letting in more light and eliminating extra furnishings.