Buying a house instead of renting is, depending where in the country you live, often more cost-effective. But upgrading from a smaller home to a larger home and mortgage? Probably not.
“There are solid reasons to upgrade your home. For many, it was always the plan. You buy a starter home, and upgrade to a larger one once your family expands. Or your income expands, and you finally move into your dream home. Regardless of your reason, the typical first step is determining what you can afford. A standard rule for lenders is that your monthly housing payment (principal, interest, taxes and insurance) should not take up more than 28% of your income before taxes. A quick and dirty way to check how much you can afford is through calculators like myFico calculator.
The U.S. homeownership rate may have finally bottomed out, as the share of Americans who own homes is steadily climbing. The ownership rate posted an increase in the second quarter, reversing a sharp downward trend that begun in the Great Recession.
The homeownership rate was 63.7 percent in the second quarter, the U.S. Census Bureau reported. That marks nearly a full percentage point increase from a year ago. Last year, the homeownership rate had plunged to a 50-year low of 62.9 percent.
“The addition of 1.2 million households being homeowners is clearly good news, as more households are participating in housing equity gains,” says Lawrence Yun, chief economist for the National Association of REALTORS®. “But let’s keep it in perspective: There are fewer homeowners today compared to a decade ago, while renter households have risen by 8 million.
So it is still the case that the massive $7 trillion in housing wealth gains from the cyclical low point has been accumulated by a fewer number of families in America. Further advances in homeownership are required to strengthen and broaden the middle class.”