One of the biggest milestones in any adult’s life is the day he or she purchases their first home. That’s the day when they finally seize destiny by the neck and slip away from the control of landlords, parents and roommates. It’s also going to be a day when that newly minted adult realizes that proper financial planning is no laughing matter.
As we saw all too clearly during the financial collapse of 2008, home ownership is a big responsibility. Too often we see first time buyers who, literally, bite off more than they chew and wind up in financial hot water. A terrible situation is that much worse because it’s so easy to avoid. With a little advance planning, almost anyone can purchase a home that’s both comfortable, and in their price range.
Here’s how it can be done. Run the Numbers Here’s a simple rule that, pretty much, could have prevented the financial crash of 2008, “Don’t buy more house than you can afford.” In fact, we’d take that a step further and say, “Buy less house than you can afford.” Buying a home that’s at the top of your price range doesn’t leave much room wiggle room when unforeseen circumstances arise.
While we more than understand how nice it is to have a high-end, highly comfortable home, there’s something to be said for financial security, too. If you purchase a more affordable home, you can still set aside a small amount each month into savings. That money can be turned around and used to help supplement the down payment on a future home.
We’d also caution first-time homeowners to set aside a small amount of savings for a home emergency fund. Even small condominiums can require serious repairs (and there are plenty of repairs your homeowners association won’t be any help with). If you’ve got enough in the bank to weather one or two plumbing or electrical problems, your finances will be well-insulated against disaster. Be Ready to Work One thing your mortgage broker won’t tell you is that home ownership involves a heck of a lot of hard work.
Simply maintaining a yard and keeping the interior of your home straight is going to be a serious challenge. If you’re not ready to spend weekends with a paintbrush in your hand or pushing a mower across your yard, home ownership probably isn’t for you. And no matter how much you might think about paying someone else to do all this work, the fact is that you’ll be doing most of it on your own. Reap the Benefits these warning are in no way intended to keep you from looking at houses for sale on websites like Zillow.
What’s really important is that when you’re looking for houses on websites like Zillow is that you know exactly what you’re getting into. When you’re ready to accept the responsibilities that come with home ownership, you’ll find that it’s a very rewarding experience. So do the math, and then get ready to do some work on your new home.