Mistakes First-Time Homeowners Make
1.) Not Knowing Your Housing Budget
Avoid buying a home that is out of your financial comfort zone. After all, you don’t want to wind up being “house poor.” You likely already have a budget and some idea of your expenses for running your current household. Now is the time to review that budget.
Some of your expenses are going to increase in a new home – like utilities and insurance. Add up all your expenses, but leave out rent or mortgage payments. When you subtract the total of this list from your take-home pay, you will have a good idea of how much you have left for mortgage payments. Check out Community Financial’s mortgage calculator and use it to calculate mortgage payments based on various available interest rates. Generally, housing costs should be 30% or less of your before-tax income.
2.) Looking Outside Your Housing Budget
Don’t even look at houses that fall beyond your budget; it’ll only set you up for disappointment. Even if you manage to buy the home, you’ll find yourself with too much house and too little money. After doing your research, you’ll know how much house you can afford. You can then pinpoint properties in that price range. Most home purchases require compromise. Maybe you’ll decide on a smaller house in a neighborhood with the best schools. If space is your highest priority, though, you might choose a larger house in a less-exclusive neighborhood. Every house has advantages and disadvantages, but keep your search within your financial comfort zone.
3.) Purchasing Based on Future Budget Changes
If you are having trouble finding a house in your price range, consider ways to reduce your current expenses. This will mean having more money available to make a larger monthly mortgage payment. Many people mistakenly assume they will make these changes once they own a house. Ideally, these budget changes should be in place before you buy a house, even if it means delaying the purchase. Give yourself at least six months to see if you can stick to your new budget.
4.) Treating Your Home as an Investment
First-time homebuyers often anticipate selling their house for a large profit in 5 to 10 years. The last decade has brought major changes to every housing market. While a house in certain areas was usually guaranteed to appreciate in value, that’s not always a sure thing anymore. Buy a house to live in and enjoy, not necessarily to make a profit from.
Your Turn: Do you have tips for avoiding house buying mistakes? Share them in the comments.
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