Let's face it the world around us has changed immensely in the last two years
and buying house today is like no other time before as such you need a home
buying plan that will set you up for success now and into the future which is
why in this video i will share with you the 30-33 rule and how you can use it to
become an expert at buying a home and if you're new to the channel then hit the
subscribe button below for more life changing content owning home has always
been a point of pride for those who go through with it beyond just owning a
home owning one that is comfortable and that suits your style is a whole
other matter in fact as you already know that kind of house would generally be
very expensive in the current market we're in this then prompts a question
how much house can you afford in this video we'll be tackling that important
question and i'll be providing you with the strategy to optimize buying a home
in the current market by using a tried and tested rule that very few people
know i'll admit the 3033 rule that i'm going to be talking about in this video
is somewhat unique when compared to other house buying methods you may have
heard about before for one it might appear complicated to many that's
probably why it doesn't have many followers but it's the most cost
efficient way of buying a house in fact this rule is commonly used by real
estate investors but we're going to go over it in more detail and i'll show you
how you can use it too so this rule is actually simple in that it's based on
three key considerations that everyone should take into account firstly the
monthly mortgage on the house should not be more than 30 of your gross income
second you must have 30 of the value of the house in cash before you go through
with the purchase and finally you should not buy a house that's price is greater
than three times your gross income so now that you know the basics let's go
deeper into this rule first it's easy for people to get caught up with a
strong desire for a house that they completely ignore the mortgage on the
house this can lead to people taking on a large amount of debt which can easily
lead to being house poor and the ruining of their credit score for years here's a
warning for those who get too emotional when it comes to the home buying process
do not let desire cloud your judgment after all what good is a comfortable
house if you're not going to be comfortable with the financial demands
that it places upon you do your homework by checking the mortgage first then make
sure you're prepared to deal with it the monthly mortgage on a home you want to
buy should not be more than 30 percent of your gross income the easiest way to
check the mortgage on a house is to use a mortgage calculator simply put in the
price minus what your down payment would be to get the total amount of mortgage
you'd be taking on then enter the rate and the length of the mortgage this will
give you how much you'll be handing over as mortgage payments if you were to go
through with buying this particular home the second part of the 3033 rule is to
be sure that you have 30 percent of the value of the home in cash before you
purchase it 20 for the down payment and 10 as a cash reserve you might be
wondering why is it so important to have this much money set aside before you buy
it let me get into those reasons now but before i do make sure to smash the like
button as you're only one of a few people who have ever shared this home
buying tactic with you see there are many advantages of having 30 percent of
the homes value in cash when buying one of them is that by having the money in
place to have a 20 down payment getting a loan should be a rather easy process
given that you're requiring less of a mortgage than if you were to put less
down on the home not to mention by putting a larger down payment you
subject yourself to smaller monthly mortgage payments which will ease your
monthly financial burden and ultimately some of your financial stress this will
free up money for future savings and investing which is critical to your
overall financial progression finally given that you'll be putting down a good
amount of money on the home you'll be taking on a smaller mortgage which
lowers your interest rate risk as less money will be affected if interest rates
were to increase from the initial rate you received when buying the home to the
one that it rises to in the future now those are some of the benefits of the
first 20 you're going to be saving but now let's get into the benefits of that
extra 10 percent in most cases when you buy home you're going to be acquiring a
property that is completely empty and unless you're one of the few who has
every appliance and piece of furniture you need for your new space you're gonna
have to show out a lot of money to furnish your new home not to mention
often your new home will need some upgrades like fresh paint some
electrical work or even just home cleaning and all these things add up and
having 10 of your home's value in extra cash will help you address these items
without having to go into debt moreover as you're probably aware a homeowner
should always set aside between one to two percent of the value of their home
for annual home care expenses so you're preemptively building in this reserve by
bringing an extra 10 to the table this is all to say that if you don't have 30
of your home's value on your own then maybe buying a house at this time isn't
for you now the final element in the 3033 rule is buying a home that costs at
most three times your gross income doing so allows you to keep your monthly cost
reasonable and gives you a general guideline for what you can reasonably
afford now if you're in a situation where there are no houses in your market
that meet this criteria of being at the most three times your income then you
have two avenues to choose from the first path involves waiting until more
houses hit the market because chances are at some point a home that meets your
needs will become available alternatively it's time to make more
money if you can increase your income this will allow you to afford a more
expensive home finally there is the option to overextend and buy a house
that's four or five times your gross income but this is simply inadvisable as
this will put an extreme amount of strain on your finances as well as your
overall well-being now you may be wondering in what situations this home
buying rule is applicable and let me answer that now the 3033 rule can be
applied to any type of property such as a freehold house a condo or an apartment
essentially the concept guides you towards making a sensible home buying
decision and avoids taking on a property that will limit you financially now and
into the future now that you have a deeper understanding of the rule you may
want to know some of the elements that should be incorporated in your home
buying decision well stick around and i'll get into that now there are many
different factors to be considered in your home buying decision one of the
most important factors to consider is location location is a big factor
because you can't just detach your home from the ground and move it at will
hence you need to buy a location that will best suit your present and future
lifestyle fortunately when it comes down to deciding on a location several
websites provide tons of information on neighborhoods this will help you decide
what areas are best for your family and which are the most conducive to the type
of life you want to live for example a younger adult will probably want to be
in town where there is a lot of excitement and access to a plethora of
jobs whereas a retiree may not need to be wrapped up in the hustle and bustle
of downtown living one important factor when it comes to location is safety one
of the best indicators of how safe a neighborhood is can be shown in the
crime rate of an area there's a high crime rate then it's probably not a good
area to live in the condition of the home you've got your eye on is also
another element that you must consider at times it can be enticing to buy a
home whose price is rather low compared to others on the market but this is
almost always a reflection of its desirability unless you are very handy
or work in the renovation business buying a home with most of the work
already done is your best bet in fact if i can give you one other crucial piece
of advice in this video is that you should always have a home inspection
done before buying any property by doing so you can gain an understanding of
whether there are any major flaws at the home which you wouldn't have picked up
through a standard walkthrough it's also important to think about future
lifestyle needs when buying a house and unfortunately as humans we often have a
hard time looking past the present but the future is just as important of an
element when making your home buying decision for instance that downtown one
bedroom condo may work for you now but would not be conducive to starting a
family moreover that house in the country may be great while you're
working from home but if you ever get asked to return to the office then the
commute will be anything but pleasant now of course no one has a crystal ball
but the better you can anticipate future needs the better off you'll be now that
you know the elements to consider when buying a home i think it's only right
that i briefly explain the process of searching for and transacting on a home
so first off head to your bank and inquire as to how much of a mortgage you
can be pre-approved for with proof of income in hand you should be able to
access the starting figure pretty readily which will give you a gauge of
how much you can spend on your new home then the house search begins select
parts of town which meet your needs for example they're close to work or they're
in more affordable areas then as you come across houses put them in different
categories depending on the price range that fits your budget you can do this
process on your own but i would recommend that you hire a realtor to
help you out in most places as a home buyer it's a seller who pays both agents
therefore gaining the help of realtor as a buyer is generally free as you start
to pinpoint a few properties that meet your needs begin to do more research on
the property's history the particular location and even take a drive and see
the house in person then if you're really keen on the home set up a home
inspection to make sure the home is in an acceptable condition if the home
passes inspection then it's time to put down an offer however before going
through with any home purchase make sure you always have the 3033 rule in mind if
you do then making a poor home buying decision is almost impossible hey it
looks like youtube thinks this next video is the one that will change your
financial life forever give it a watch and let's see if they're right