FHA Mortgage Guide

According to Crescent Communities, big homes are out and little homes are in for 2009.

The North Carolina builder and developer reports that “buyers are examining their lifestyles and the most important aspects of their new homes. The result is a smaller home that maximizes the square footage. But, a smaller home does not mean sacrificing on luxury. You’ll find that these homes still have expected luxury features – granite countertops, top-of-the-line appliances, upgraded trim packages and luxurious owners’ baths. Even in the largest, most luxurious homes, you’ll find that one room or more has been eliminated to reduce the square footage.”

Forgive me, but I find some redemption in these words.

I have repeatedly said that one way to cut housing costs is to reduce home sizes. Why? Because few people need today’s mega-mansions and each additional square foot increases cost.

As I have explained in the past, here’s why:

“According to the National Association of Home Builders, a home built in 1950 usually had 700 to 1,200 square feet while in 2007, says the association, the typical new home averaged 2,479 square feet.

“Bigger homes, of course, require more dollars to buy, finance, refinance, insure, heat, air condition, and carpet. The equation is bigger homes — bigger mortgages — and we all know how bigger mortgages impact monthly payments.” (See: Mega Homes Versus Real Estate Sanity)

Meanwhile, while home sizes have been growing, household sizes have been shrinking. The result? More indoor acreage per person than anyone really needs.

Now if you like a big house, that’s great. Just remember Miller’s Oft-Repeated First Law of Real Estate: Never buy a house you don’t want to clean.

Also remember this: A bigger home uses more energy. Lots of big homes mean that additional electrical generating stations are required and that means higher electrical costs for everyone, including folks who live in smaller homes.

People have long complained about FHA mortgage loan limits, but smaller loans are not a problem in most areas — though not all — if you simply buy a smaller house. Figure it this way: If homes have a given cost-per-square-foot then if you have fewer square feet you have a lower cost basis.

By “smaller house” I don’t mean a hut or a shanty. I mean a house which makes sense given the number of people who live there and their needs. A house which uses space well.

Long ago I used to know folks who had a mansion. A real mansion, with lots of rooms, a greenhouse, staff, etc. The funny part of the story was that the owners used just a few rooms, all on the first floor. The rest? I never figured out why the owners needed so much extra space given that they largely hung out in the den and kitchen.

If you don’t have a staff, why get a huge house? Go small, go FHA, live well and pick up a copy of The Millionaire Next Door.

Check out these FHA resources for more information

This entry was posted on Monday, November 24th, 2008 at 2:55 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.