Financial Mistakes for New Homeowners to Avoid
New homeowners work incredibly hard when hunting for the perfect home. Rarely do they overlook finding the best mortgage rates or lenders, and they never move forward without getting a green light from a trusted home inspector. One neglected home-buying practice, however, is taking a personal inventory of financial responsibilities. Failing to prepare financially after making that downpayment can spoil all of the above-mentioned effort and excitement.
Build Up Your Savings
The foundation of responsible home-buying is a strong savings account. Everyday expenses (groceries, utilities, car payments/insurance/fuel) can become increasingly burdensome when combined with a mortgage, but imagine also being surprised by an unusually high electricity bill or car repair invoice. Savings can keep homeowners from falling into debt or sacrificing areas of everyday life to pay off small surprises. Consider other expenses that aren’t part of a lender’s calculations as well: vacations, dining out, holiday shopping and movie tickets. Ensure a healthy balance of homeownership, everyday life and recreation with a strong savings account.
It is not a comfortable topic, but preparing for sudden and distressing expenses is important. Losing a job, excessive medical bills due to illness and experiencing a natural disaster often leave homeowners in dire straights. Successful homeowners lessen the blow by investing in robust home and health insurance plans. A good understanding of home repair costs is also helpful to avoid being taken advantage of by contractors.
Concurrent Large Purchases
Buying new furniture, electronics and cars shortly after buying a home is usually a recipe for trouble. Impressing guests and neighbors is always fun, but consider the long- and short-term effects of stacking large purchases, as opposed to spacing them out a little more.
Cheap Financing Offers
Offers for “0% interest” or “no payments for X number of months” are very attractive, especially when stretching your budget to land that new home. Be sure to read the fine print and research thoroughly to avoid surprising loan fees, balloon payments or significant loan terms that a lender might have “forgotten” to mention. New homeowners should educate themselves and actively shop for trustworthy lenders and loan structures that match their budgets.
Be sure to optimize your buying experience while safeguarding your long-term financial well-being. Saving and budgeting might not always be fun, but they are the groundwork for a more relaxing and secure homeownership experience. Open Mortgage is of course just a phone call away if you’d like to go over your home financing needs.