Mistakes First-Time Homeowners Make
Buying a house is one of the biggest decisions you will ever make, and there are common mistakes that many first-time homeowners regret making. Make sure you are aware of these mistakes and do your best to think through all of the details before you start looking for your new home. Here are 4 of the most common mistakes that you should avoid while you are in the market to purchase a new home.
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, so make sure you do all of your research instead of just assuming that you can afford a house based off of the estimated monthly mortgage payment you will make.
Some other budget items may change, too. Also, some expenses, like laundromat costs, may drop off the list completely. 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. Find a mortgage calculator online 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. Consider completing our “Considering Homeownership” module on our Financial Learning Center to make sure that you are completely financially prepared for this big purchase.
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.
Purchasing Based on Future 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.
Treating Your Home as an Investment
First-time buyers 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 almost guaranteed to appreciate in value, that is no longer a sure thing. Make sure to study the market before you purchase your home so that you don’t end up getting turned upside down when you sell a few years later.
These four important things to keep in mind are crucial to your home buying journey. You can even keep a notebook with all of this information inside so that you can refer back to it throughout the whole process. For more help with purchasing a home or getting a mortgage, talk to one of our member advocates at Gulf Winds today!