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Have you ever heard the term House Rich and Cash Poor? If you own a McMansion, but have no furniture and eat Ramen noodles every night, you might be house rich and cash poor. Generally, it means you financially overextended yourself. Andy, a home buyer from Alpharetta, Georgia, asked this weeks top viewed question on Trulia Voices - “Our combined income is around $121k a year. Are we being unrealistic looking at homes priced close to $500k?” By asking our real estate community for advice, Andy has taken a proactive measure to assist him in making a very important home buying decision. One that will hopefully help him and his wife live comfortably within their means.

Feedback from our Trulia Voices Community

Jeff Mitchell, a real estate agent from Vero Beach, Florida, says, “A fairly conventional guideline is that your home payment costs including taxes and insurance should not exceed 30 to 33% of income. You should also have some savings in place in addition to your down payment and closing costs to be on the safe side. The recommended savings is about 6 months of living expenses. If you have been pre-approved with a reliable mortgage lender, your finances are probably in good shape.”

Joshua Jarvis, a real estate agent from Atlanta, Georgia said, “It’s about your budget. What can you afford per month… and what does that translate into a home.  Get your budget straight is only the first step. Getting a plan and strategy together is your second step. You need to plan on how long you will live there, what is your equity strategy (how much will you put down) and what is your exit strategy… i.e. Rental, resale… ect.”

Real estate agent Hank Miller from Georgia, said,”Your lender and your agent can work up what the expected monthly carrying cost of a home can be. Budget that with your other expenses; add a few percent for the unexpected and you’ll get an idea of what you can afford. Obviously at that point you need to start checking inventory, then hopefully find something that matches. Don’t buy a home to get rich, buy a home to have a rich life and enjoyTrulia Blog - Real Estate Search › Edit — WordPress the benefits that come with owning your home.”

Lee Adkins, a real estate agent from Alpharetta, Georgia said, “If you are not working with an agent yet, you should talk to the guys here on Trulia (you can click on their pictures for direct contact info) and/or ask for referrals from friends who have had good, direct experiences with particular agents. I would recommend interviewing more than one agent to find the one who best suits you and understands your goals.”

Ty Davis, a home buyer in Atlanta, Georgia said,”Although many people will probably disagree with this, most people who know a thing or two about finance will say that you should spend between 2-3x your annual income on a home. Actually, one person said you should spend about 30% of your net monthly income on a payment, which ends up being in the 2.75x range. I personally believe this to be a wee high, but that’s just my opinion.”

Jenifer Bowman, a real estate agent from Atlanta, Georgia said, “Personally, I always tell my clients to go for a house that is less than they were approved for. Approved numbers are in a perfect world.”

Andy followed up in the thread and said, “Wow what a bunch of great responses!!! Definitely some things for my wife and I to think about. We already have an excellent Realtor that we’re working with. Unfortunately, we keep seeing the same houses for sale week after week with very few new ones coming onto the market.”

My Thoughts

As a home buyer, Andy is doing his homework. Our voices community is providing some valuable answers. It’s another healthy conversation.

Today’s unique local market conditions dictate that home buyers complete their due diligence about the local housing market, their own financial standing and their purchasing power. A knowledgeable local real estate agent and mortgage broker can help home buyers make the best informed home buying decisions. As you can see, we have some great ones right here on Trulia Voices.

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