When Is it the Right Time to Buy a Bigger House?

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For many Americans, bigger is better, and buying a larger home is a standard part of their American dream. Buying a spacious home often signals financial progress. It also can improve your level of comfort, especially when you intend to add more family members to live there.

Before making a large financial commitment on a bigger house, consider several financial and life factors to determine the right time to buy.

Finances The first question you must ask yourself before buying a bigger house is whether you can comfortably afford it. You can quickly lose your sense of financial security if the monthly payment is too high for your budget. As a rule of thumb, lenders require you to earn at least three times the monthly payment on a new house. A housing payment typically includes mortgage principal, interest, property taxes and homeowners insurance. It might also include mortgage insurance to cover your lender if you put less than 20 percent down; special tax assessments; and homeowners association dues, depending on where you intend to buy. Buying a bigger house makes the most sense when your income is stable and you expect it to remain the same or increase for the foreseeable future.

Market Conditions Upgrading to a larger home is a good idea when market conditions favor buyers. Taking advantage of a housing slump, in which home prices experience a sharp decline, allows you to get more house for your money, assuming you can obtain the financing and compete with other eager buyers. You also have more opportunity to negotiate better prices with sellers. Buying a bigger house when interest rates are low is also a good idea because lower rates mean smaller monthly payments and more purchasing power. Just keep in mind that if you plan to sell your current home before moving into a bigger one, you will likely face the same challenges finding buyers at the right price.

Family Size Your family's needs are a big part of why you might need a bigger house. It is the right time to upgrade your space when your current home no longer meets your family's everyday requirements. For example, you will probably need to move when the size of your family has increased to the point of needing an additional bathroom, bedroom or recreational space, or you anticipate your family will need more room in the near future. This usually happens when you have children or take in other adult relatives.

Considerations Rather than buying a bigger home simply based on size, or because you can afford it, consider the home's features to ensure it fits your needs. For example, a multi-level home with more square footage might not be a practical choice if you plan to move elderly or disabled parents in with you. The home's layout might pose problems which are costly to remedy. On the other hand, if you live in a multi-level home already -- and are inviting elderly or disabled parents to move in with you -- you might need to buy a larger home that is only one story high, as long as you find one that fits comfortably into your budget.