The step toward home-ownership can be an exciting one, but there are expenses you should know about before actually making the purchase and “signing your life away.”
Typically, while people still live at home with their parents, they tend to have a lot of disposable income as they don’t have a large rent or mortgage payment to make (rent or mortgage payments tend to eat up a high percentage of one’s income). Even people that are renting and want to make the step to buying a house need to consider additional expenses.
These two scenarios are much different than owning and paying for your own house!
A few weeks back I saw an episode on HGTV of a couple searching the real estate market, hoping to find their VERY first home. The couple spoke with a lender that advised them look at homes in a relatively large price range (large for them personally). So, of course, they take the advice of this lender and start looking at homes in this price range.
These homes were large with upscale features that almost anyone would fall in love with. Neither person in this couple striked me as being the finance guru as you see in some couples. I found this to be worrisome.
Luckily, the female, let’s call her Sally, started feeling uncomfortable about buying a house with a high price tag even though they found one that they liked and wanted to buy. She decided that it was best that they get a second opinion.
Let’s give a round of applause for Sally. Sally and her hubby, or soon to be hubby, went to a second lender only to discover the “bad” news. This lender, in fact, informed them how their initial budget was wrong and didn’t factor in important, large expenses that come with home-ownership (meaning that they couldn’t afford as much house as the first lender advised them).
The lender sat them down and explained to them that on top of paying for their mortgage, they also have to pay property taxes, home insurance, and should also budget for any large appliances that could break or perhaps replacing a new roof in the future. This was an eye-opener for Sally and her hubby.
Continuing with the process and making a much more informed decision, Sally and her hubby decided to start looking at houses in their new, more comfortable, realistic price range that won’t strap them for cash and enable them to pay these extra expenses that come with home-ownership.
So remember, when you are buying your first house, make sure to budget for property taxes, home-owners insurance, and large expenses (such as appliances that break or a roof that needs to be replaced), even if the lender makes you think that you can afford more house than you really can, on top of your normal expenses such as utilities, food, etc.
Has anyone had a similar experience or know someone that experienced this same thing?