Are you ready to buy a house? Answering this question may be more complicated than you think, as you need to consider all the costs of ownership, including your mortgage, property taxes, insurance and maintenance expenses.
Unfortunately, far too many people think they’re ready to take on the added expense of owning their own home – only to find after the purchase that they’re in over their heads.
You don’t want this to happen to you, so you might want to take advice from financial expert Suze Orman and “play it at home” before you buy.
What does it mean to “play at home” before buying a house?
Orman explained the concept of a “playhouse” in an interview with Apartment Guide.
She warned potential buyers that in addition to their mortgage principal and interest payments, they would also need to cover taxes, insurance, and maintenance and repair expenses. And she suggested trying out those payments before committing to pay.
How does it work, exactly? Orman simply explains it. She thinks those considering buying a home should practice making housing payments for a full six months before moving forward if the cost of ownership is higher than rent.
“For six months, if you’re a tenant and your rent is $2,000 a month, and I said there could be $800 more for property taxes, insurance, maintenance, and d other things, so for six months I would pay my rent and then put that extra $800 in a savings account, so I knew if I could easily afford to own a house that was going to cost me $2,800 $ per month.”
If you follow Orman’s advice, you’ll be able to get a realistic idea of what life would be like on your new budget after becoming a homeowner.
“If you find it was a struggle and you were late making that payment, you didn’t like the fact that you couldn’t go out to eat because of it, then you were about to buy a house you can So play house, and you’ll know how much of a house you can afford,” she said.
Should we follow Orman’s advice?
Orman’s suggestion that you practice making your new housing payment is great advice for several reasons.
As she points out, you will be able to determine if a house is really affordable for you if the costs are higher than your rent. It’s best to find out if you can live on a new, smaller budget before committing to extra housing payments for decades. By playing at home, you can reduce the chances that you’ll regret owning because you’ll go into your purchase with realistic expectations.
You will also end up with a lot of extra money in savings if you follow his advice. As Orman says, that extra cash can go toward some of the upfront costs you face when buying, such as closing costs or moving costs.
For all these reasons, if you are planning to buy a house soon, you should seriously consider “playing house” as soon as possible before moving forward.
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