Why Your Budget Shouldn't Dictate Your New Home Options

budgeting

 It’s true that budgeting is a critical part of buying a new home. However, it’s not the sole factor in choosing the right model, square footage, and upgrades for your family.

Ryan Homes at Brunswick Crossing breaks down the top three most common budgeting options and why none of them should dictate your choice in a new construction home:

Crash budgeting is harmful to your long-term finances. If you randomly cut back on “fun” expenses, like shopping and eating out, in order to free up extra dollars, the practice yields immediate results.

However, it doesn’t yield healthy long-term finances.

According to Forbes, “Budgeting is a lot like dieting. The short-term spending deprivation actually prevents us from succeeding in the long-term. Just like drastic dieting [produces] food bingeing, drastic expense cutbacks cause binge spending.

Binge spending includes buying unnecessary “things” or overspending on shopping, travel, or eating out because you crave swiping your credit or debit card in the name of fun.

This budgeting practice doesn’t serve well for buying a new home either. If you cut out “fun” to only pay bills and loans in order to put every cent toward a home, you end up unhappy until your big purchase.

Static budgeting can’t determine everything. Making an ultimate budget spreadsheet or checklist with every expense you can think of isn’t a good financial practice, because we can’t anticipate many future expenses. What about a surprise doctor’s visit due to an ear infection? Or a new laptop because yours broke?

When you make a list, it’s inevitable that you’ll forget something -- no matter how hard you try. You may get sidetracked or overwhelmed, and it’s not your fault. Life happens!

It’s the same with homebuying. A static budget can’t determine all of the intricate details of buying a new home, including closing costs and home insurance, so it shouldn’t solely dictate which model or neighborhood you choose.  

Preemptive budgets don’t see the big picture. When people become panicked or overwhelmed by a period of overspending, they often see a monthly budget as the solution. The problem with this budgeting practice is that you need to analyze months worth of spending habits to determine where your money is going and where it should go in the future.

Monthly budgets also often miss big-ticket items like car maintenance, summer vacations, or buying a home. If these large expenses aren’t factored into a long-term budget, they’ll most likely go onto a credit card, which damages your credit score and chances of qualifying for a good mortgage rate.

It’s important to recognize that budgeting is essential to buying a home, but it’s not the only factor that you need consider. It also shouldn’t be a limiting factor.

Talk to a new home sales consultant about how to budget for buying a house according to your current lifestyle, future wants and needs, and available mortgage options.

The overall goal is to help you understand how you to afford your dream home -- no matter the model, square footage, or location -- without sacrificing fun, foregoing necessary payments, and forgetting long-term expenses.