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Monday, March 21, 2011

How to buy a house like Warren Buffett

Here are 3 basic steps Buffett urges every American who owns a home - or wants to - to include in their approach to home ownership. 
1.  Ditch your "dream home" for a practical pad. When it comes to homes and mortgages, bigger is not always better.  What is better is to buy a home that makes sense for your family's future and its finances. In Buffettt's own words, "a house can be a nightmare if the buyer’s eyes are bigger than his wallet and if a lender . . . facilitates his fantasy."  Instead of buying dream homes, Buffett went on, the goal should be to buy a home you can afford.

2.  When you buy, plan to hold. Warren Buffett is worth $50 billion, and he still lives in the home he bought 52 years ago - for $31,500. Many Americans got caught in the housing crash when they took on mortgages they could only sustain for a short period of time, then weren't able to refinance as expected. Buffett's stock investing advice has long been to avoid making investments you can't hold for at least 10 years. Likewise, buying a home should be done with a long-term plan to avoid catastrophe when home values fluctuate in the short term.

3.  Mortgages should have fixed, affordable payments. In his shareholder letter, Buffett points out that a housing company he holds has done vastly better than other real estate and mortgage industry players and attributes their success to the fact that "our approach was simply to get a meaningful down-payment and gear fixed monthly payments to a sensible percentage of income."  Buffett believes these two mortgage musts are the key to avoiding foreclosure, opining that "[i]f home buyers throughout the country had behaved like our buyers, America would not have had the crisis that it did. . ..  This policy kept [the company] solvent and also kept buyers in their homes."  


Part of article from T r u l i a . c o m


Makes sense to me. Need to downsize? I can help. Want truthful advise on how to stay in your home? I can help or know someone who can help. Need info on getting your mortgage fixed up? I can help you find the right mortgage officer who will take the time. Give me call.

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