The Risks of Going Over Budget When Buying Your Dream Home

Setting a budget when buying a home is crucial in order to narrow down your search and ensure you stay within your financial means. Factors such as your down payment savings, income, and mortgage lender's approval all play a role in determining your budget. However, a recent survey by Architectural Digest reveals that almost half of U.S. home buyers are willing to exceed their budget by about $50,000 in order to purchase their dream home in 2024. While it may be tempting to stretch your budget, going over it can have serious consequences.

One of the major risks of going over budget is the potential to become house poor. It's understandable why someone might be tempted to spend more than planned on a home they truly adore. However, this can lead to a situation where housing costs consume a significant portion of your income, leaving little room for other essential expenses. Even if you can technically afford your monthly bills, you may find yourself with little discretionary income for leisure activities or unexpected expenses. This can be a source of significant stress and strain on your finances.

Moreover, going over budget increases the risk of losing your home. Falling behind on housing payments could result in foreclosure, especially if a series of missed payments occur. Losing the home you worked so hard to buy is a devastating outcome that should be avoided.

To prevent these potential pitfalls, it is essential to set a housing budget and adhere to it. Resist the temptation to view properties that exceed your budget, and communicate your price range to your real estate agent. If your agent continues to show you properties beyond your means, consider finding a new agent who respects your financial boundaries.

Ultimately, sticking to your budget is crucial for maintaining financial stability and avoiding unnecessary risks when buying a home. Don't let the allure of your dream home lead you into a precarious financial situation. Stay within your means and make a sound investment in a home that you can comfortably afford.