Suze Orman: How to Ultimately Afford Your Dream Home
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Jump ahead to today, and even though I'm wealthier, I'm still a practical dreamer. I don't need some fantasy mansion. I buy what I need, as opposed to what I can afford. That approach has never let me down, and I'm certain it can work for you.
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Create a dream you can achieve, the next step that works for you. If you're renting a small studio, dream about a condo of your own. If your family has grown and your house hasn't, dream about a place with one more bedroom and a backyard big enough for the jungle gym your kids want.
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But remember: Your dream starts coming true the minute you commit to socking away money. Every month you put something aside, spending less in order to save more, puts you a month closer to the dream. One benefit of the rise in interest rates is that your savings can earn more. Check out the deals offered by online banks that have high-yield savings accounts.
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There is simply no guarantee that's how things will work out. A scheme that requires holding your breath for the financial planets to align in your favor can become a disaster.
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Add to that the commission to the broker who sells the old place and the closing costs on the new one, and you're talking serious outlay. And don't forget moving costs, or the fact that a more expensive house means higher property taxes and insurance. Not so dreamy after all, eh?
So before you make the open-house rounds, sit down right where you are and consider what you have. Do you really need a new house—or would the problem be solved by a beautifully redone bathroom or an extra bedroom for guests? Renovating rather than relocating can be the smarter financial move, with one caveat: Don't go too far beyond the neighborhood's basic level, upgrading to the point where you have a Taj Mahal bursting its boundaries on a block of ranch-house subdivisions.
The rule still applies. Go for what you want, but don't go overboard. Find your practical dream.