How To Determine if You Need a Bigger House

Homeownership is usually a lifelong journey. For many people, sizing up happens over time as families and budgets grow. If you’re thinking about moving from your current home into a bigger home, we’ll help you determine whether it makes sense and what factors you should consider along the way.

What Are the Signs You Are Ready for a Larger Home?

The most obvious sign is the feeling that your current space is inadequate. If your family is growing and you have more people in it than bedrooms, you’ve probably outgrown your home. If your living areas feel cluttered even when they’re organized, it could be time to purchase a bigger home.

Bigger homes certainly have their advantages – but you’ll need to be sure you can handle the added responsibilities and afford the added costs that accompany them.

You need extra space inside and outside

Let’s say you bought a two-bedroom, 1,400-square-foot house with a yard several years ago. And since then, you got married, had twins, adopted a dog and started working from home. Your good-enough-for-you home might suddenly feel awfully small as your family grows but the amount of space you have stays the same.

Living in a space that’s too small can be frustrating and inconvenient. It might be bearable in the short term, but in the long run, it can make your day-to-day life a challenge, from preparing meals to keeping rooms neat and clean to working from home. If you’re feeling the squeeze and your home no longer fits your life or your lifestyle, it’s a good sign that you may need to upgrade to a bigger house.

You have mastery of your finances

Not everyone who could use a bigger house is in the best financial position to buy one. Yes, living in close quarters may be challenging, but buying a home you can’t afford in the long term is potentially dangerous to your financial well-being.

Here are some financial goals you should achieve before you consider buying a bigger house:

• A low debt-to-income (DTI) ratio
• A healthy emergency fund and savings you can continue to grow (six months’ salary in your savings account is recommended as a great emergency fund)
• A good or excellent credit score
• Enough money saved for a down payment of 5% or more (keep in mind that if you put less than 20% as a down payment, you may need to pay extra for private mortgage insurance)

What Are the Signs You Can Afford a Larger Home?

Once you’ve hit your financial milestones, you should run some estimates to see how much home you can afford.

Assuming that you can swing the down payment, determine how much you can afford to put toward housing every month. Ideally, it should be no more than 32% of your total income and should include:

• PITI: This is the total amount you pay each month for your mortgage including the principal and interest on the loan, property taxes and homeowners insurance costs.
• Homeowners association fees (if applicable): If your home is in a community with a homeowner’s association, you may benefit from added amenities such as security or maintenance, but you’ll pay extra for it each month.
• Utility bills: A bigger house usually comes with bigger bills to cover gas, electricity and water. Also, depending on where you live, you may have seasonal spikes to your utilities such as higher heating costs in the winter and higher energy bills for air conditioning in the summer.
• Maintenance costs: Every house needs care and repairs over time. Don’t forget to set aside money to cover regular maintenance of your home and to set aside money to make larger repairs when things break down. A standard annual maintenance fund should be about 1% of your home’s purchase price each year.

When Is It Better To Stay Where You Are?

Sometimes you can’t help but think the grass is greener on the other side. It would be easy to imagine that the only solution to your current space constraints would be a bigger home. And while that might be the case, bigger homes often come with bigger hassles.

Here are a few reasons why staying put might make more sense:

You can’t get the location you want

Finding a larger home in your current neighborhood might be a problem, especially in a seller’s market where inventory is low. And you may find yourself priced out of expensive neighborhoods with larger homes.

In real estate, location is everything, especially if you’re already thinking about the home’s potential resale value. You may need to make a choice, weighing your need for a larger home against your need to live in your desired location.

You’re not sure you can manage the responsibility of a bigger home

From responsibilities to costs, everything gets bigger with bigger homes, including your monthly mortgage payments, cost of repairs, mowing the bigger lawn, cleaning and cooling or heating the home. These ongoing expenses can come with higher price tags and bigger demands on your time – money and time that could have been spent elsewhere.

If you love traveling or trying out new restaurants, buying a bigger home might mean compromising or cutting out travel or dining out. A bigger home can quickly eat into your discretionary budget.

What Are the Steps to Getting Your Next Dream Home?

The first step in this process is to budget for costs. Take some time to get your finances in order so you can make a strong offer when you find the right home. And if you don’t want to waste time, stick to your house buying budget. There’s no sense touring a $1.2 million home when your budget is $800,000.

You should also consider hiring a real estate agent to help you navigate the home buying process.

Getting preapproved is a crucial step in your house hunting journey. Learn how to get preapproved for a mortgage to expedite the home buying process and avoid potential hiccups.