May 25, 2017
With the resurgence of the real estate market, a lot of Millennial buyers are finally ready to dip a toe into the world of homeownership for the first time. But that raises questions of just what fiscal pitfalls an inexperienced house shopper might want to consider. According to an article in CNNMoney, there are several points you should bear in mind when it comes to finances and making the biggest purchase of your life.
• Figure out your range. High hopes and a few dollars in the bank aren’t a solid footing and a down payment isn’t a financial plan. You need to take a realistic inventory of where you are at budget-wise. What you want may not be what you can afford. That could mean adjusting your expectations or perhaps waiting a bit longer until your income can accommodate your dreams.
• Remember expenses. There is more to a home than your house payment. Keeping the lights on costs money. So does keeping the roof and walls up so be sure to figure in maintenance costs. Experts interviewed by CNN note that new homeowners tend to underestimate the price tag for moving in as well as for living expenses. They recommend that the mortgage payment not exceed 30 percent of your pre-tax income.
• Keep something in the bank. If a new home just barely fits your budget, then it doesn’t really fit your budget at all because the goal is not to spend every dime you have. Overextension can leave you vulnerable to unexpected expenses or even an errant estimation of expected ones. Like any good general, you want to keep your reserves ready in case the battle goes badly. When problems arise, an empty savings account and full credit cards are a bad combination.
• Be wary of revamps. With the popularity of home remodel shows, everyone wants to try their hand at a residential facelift. Obviously, you’ll want to make some changes to your new digs but remember that real-world expenses can be far less predictable than the ones you laid out on paper. If you decide to purchase a home that “needs love,” keep that in mind while making out the budget. You might get a good deal on a fixer-upper but if you’ve just purchased a money pit, make certain you have the resources to fill it.