Ready to buy your first home? Congratulations!
What considerations should you take into account when budgeting for a house? Your desired location and the amount you want to spend are two of the biggest factors. Right? But these two considerations may be much more intertwined and fiscally significant, than you may realize.
The REAL cost of a home entails much more than just the sales price. For example, if you are employed and travel to work every day, your commuting costs can quickly add up. To prevent a serious, long-term financial mistake, take time to calculate this cost. Consider this… If you buy a $200,000 house in a neighborhood within walking distance of your job, plus have easy access to other shopping and entertainment essentials, you could save tens, or even hundreds, of thousands of dollars, as compared to a $100,000 home that requires a 45-minute daily drive to work.
To illustrate the point, consider a round-trip commute of 41 miles each way, 5 days a week, 50 weeks a year. The cost to operate and maintain an average-sized sedan for this commute is $9,800 per year (2016 figures). Only 15 years into paying off your mortgage, you will have spent $147,000 on commuting, as compared to $0 in commuting expenses for a location where you can walk to work. That’s also assuming the cost of owning and operating a vehicle doesn’t go up in the next 15 years… at all.
However, picking a Home is about more than work. Commuting may be a big part of your decision, but when choosing a location you should also take into account any additional driving you may do to meet friends for dinner, to go to the grocery store, and to do other social and personal driving. If you are social by nature, and you buy a home that is miles away from your favorite places and people, you’ll be spending more money to live there.
Remember: Jobs may come and go. Buying a house is a long-term commitment. Be sure your home is in a location where you want to live and is well suited to your lifestyle.