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7 Rules For Buying A House 1) NEIGHBORHOODS appreciate in value, houses don’t. In other words, you should prioritize “buying the neighborhood,” not the house. Buy the crappiest house in the absolute nicest neighborhood you can afford. This will set you up for maximum financial upside. Plus, who cares if you have a fancy kitchen if you hate the neighborhood you live in? 2) You should be able to afford the payment on the 15 year mortgage, even if you plan to use a 30 year mortgage. Remember, you can always get lower payments with a 30 year mortgage (and then pay extra principal every month if you want to pay it off sooner). 3) Remember that the house you live in is not an “investment.” It’s a consumption decision. People often get this confused because homes go up in value. Sometimes they go up in value a lot! It’s always nice when that happens, but it’s not the reason you should buy a house. Never assume it will be a great “investment.” Buy the house you love, that you can realistically afford, in a neighborhood you feel good about. It’s better to love where you live, and focus on saving for retirement with stocks/bonds/investments, than to buy a house you hate living in “because it was a great investment.” 4) Generally your DTI needs to be below 45% to qualify for a mortgage (ie if your gross income is $10,000/month your total debt shouldn’t exceed $4,500/month). However, this is unwise. It’s usually best to keep your monthly payments below 30% of your monthly income if you can. 5) Interview realtors. “Shop around” just like you would for a mortgage. Different agents have different levels of experience and perspective. Some charge more commission than others. Some are worth paying more commission to, because they’re honestly better! Don’t just work with your friend’s cousin because he’s licensed as a real estate agent. Do your homework. If you don’t have an agent yet, I can recommend realtors that I personally know and trust. 6) If you plan to move in less than two years, it probably doesn’t make sense to buy a house. Yes, home prices will probably increase in the next two years. Yes, this means you’ll “miss out” on equity gains. But there are costs of selling a house (commissions, closing costs, etc) that cancel out most of the benefits of homeownership if you’re only going to be living there for a year. In that case, it’s probably best to rent. 7) Just because you’re pre-approved for $500,000 doesn’t mean you have to buy a $500,000 house. You should always be emotionally and financially comfortable with the payment. Don't max out your finances and become house poor. -Mitch PS Here's all the boring stuff I'm legally required to put on my Facebook posts: John Galt Mortgage Company NMLS #2075818