I moved to Westfield this past summer after my wife and I learned our family of two was about to become three with the addition of our baby daughter. It was a hard decision to leave Hoboken and all the friends and community programs we were involved with there over the years.
Even though I am originally from Union County, we were married in Hoboken and we had purchased a home in town where we envisioned raising our family. But once we started to see how much room little babies and a few pets can take up, our plans suddenly changed. What seemed like a lot of space became very relative, and we began our relocation process to Westfield.
As a personal finance professional, so many people ask me how to find the right home for their budget. There’s a lot of uncertainty when it comes to determining a realistic price range, especially in today’s economy. So here's the rule I use – both for myself and when I’m offering advice. I call it the rule of three: The mortgage on your new home should be no higher than three times your net (after tax) household income.
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So, if you want to buy that house down the street that’s listed at $800,000, and you have $200,000 from the sale of your existing home, your mortgage will be 600,000. This means you should be bringing in at least $200,000 a year after taxes.
While it’s always tempting to go for that house with the great new kitchen or the big addition in back, you don't want to stretch yourself too thin. However, you also don’t want to short-change yourself from buying your dream home if it’s within budget. My rule of three will give you a realistic guide as to what your budget should be when you buy a home.
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Jeff Romond is a registered representative of and offers securities, investment advisory and financial planning services through MML Investors Services, LLC., Supervisory Office: 530 Fifth Avenue, 14th Floor New York, NY 10036-5197 Phone (212) 536-6000. St. George Financial Partners is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. CRN201401-156413.
