Just because you get pre-approved for, say, a $200,000 loan doesn't mean you should buy a house that costs that amount. Even if you can afford it, here are the reasons you should buy a cheaper house with the help of a reputable mortgage company in McAllen, Texas and other places:
1. There is less chance of becoming house-poor
When you spend a big chunk of your income on housing costs and have less money for other financial obligations, you're considered house-poor. A lot of house-poor folks bought a house that they couldn't afford, or they bought a house that's within their budget but had a lot of other financial responsibilities to take care of. In both scenarios, buying less house than you can afford will prevent you from becoming house-poor, meaning you can still afford to live comfortably while paying a mortgage.
2. You can pay your debt faster
If you have lower mortgage payments, there is bound to be more money for other financial obligations, such as credit card bills and auto loan payments. Hence, you can pay off your debts faster and improve your credit score along the way for future investments. If you get a pay raise or another stream of income, you can even pay off your mortgage years earlier than you expected if you have a cheaper house.
3. You can put more money aside for the future
Some people may tell you that the more expensive your house is, the better the appreciation will be in the long run. While that's true in a sense, it doesn't always prove to be beneficial for all families.
For instance, if your mortgage eats up a lot of your monthly income, you might not be saving enough for your future, or not at all. You might have equity on your home, but what about your savings, emergency fund, college fund for the kids, and your retirement fund?
4. Less expensive doesn't always mean bad
Buying a $170,000 home when your budget is $200,000 doesn't mean you're choosing a poor-quality house. So, get rid of the notion in your head that buying a less expensive anything is negative. A cheaper home might not have the features or characteristics that you're looking for, but it will function as a house just the same.
5. There might be surprises down the line
In case you buy a home that's cutting it close to your working budget (e.g. a $240,000 when you get pre-approved for $250,000), you're going to have less money in the bank because it's all going to your lender. What happens if there is a medical emergency that is not covered by insurance? What if a storm destroys your roof and you have to pay a hefty deductible, assuming that you're insured? You never know what to expect in the future, so having more money available for emergencies is a great safety net for you and your family.
Buying a house that you can afford might be the better option for you, especially if you have many other financial obligations. If you are thinking of buying a house soon, keep these things in mind when deciding on a budget.