Home Affordability Rises in Importance

There are many considerations that go into buying a home . However, it might come as a surprise to some that prior to this recession affordability was not the most important factor for many home buyers.

How the times have changed.

Indeed, times have changed so much, according to the real estate search engine, Roost, that affordability has become much more important in the quest for a home :

In an Opinion Research poll that surveyed 1,002 U.S. adults by telephone May 8-11, 2009, 43 percent of respondents across the board – male/female, married/not married, and from every corner of the country – said that finding a home they can afford and maintain was the most important consideration when researching a new home , and was cited significantly more often than the number two consideration, finding a home in the right location or community.  This can be compared to a survey conducted by Kelton Research in 2005, prior to the recent economic downturn, in which a full three out of four Americans (72 percent) stated that when looking at available property, the neighborhood was more important than the house itself.

I found this bit of news very interesting. Perhaps part of the reason we are in the mess wer’re in rign now is due to the fact that other considerations took precedence over affordablitity for so long . Mortgage lenders had no concern for affordability; they could approve anyone, collect the commission and just push the responsibility off on investors through derivatives. And, of course, consumers were too blinded by the promise of “more house for the money” to stop and think about true affordability.

Now, though, the recession has many rethinking their financial decisions of the past few years . Affordability is important again. And, while “experts” recommend that you keep your mortgage payments to 1/3 of your month income (33%), I suggest the following in order to increase the affordability of your home:

• Keep your mortgage payments to 28% of your income.
• Use your net income as a gauge, instead of your gross income.
• Try to keep all your housing costs (mortgage and interest plus maintenance, taxes and utilities) to 33% of your monthly net income.

Many people are learning a hard lesson right now. If you are interested in buying a home , you would do well to learn these lessons, and consider affordability. You don’t want your home to be a hardship.

image source: BrendelSignature via Wikimedia Commons