First-time homebuyers are excited. They get extremely excited, for good reason. Owning a home means you’re responsible, achieved, and officially a respectable adult. You’re a homeowner now!
However, amid all the excitement is an unwavering need to maintain objectivity and calculate short and long-term plans. Unfortunately, once the papers are signed, some owners grow weary over the subsequent renovation needs and associated costs.
Don’t make these four financial mistakes, ironically turning owner excitement into anxiety.
Underestimating Renovation Costs
The costs of homes vary. There is no regulation regarding a cost threshold for high or low pricing. Obviously, being a major purchase, perhaps the largest purchase in one’s life, price becomes a factor.
Young couples and singles are sometimes attracted to the cost of modestly-priced homes, especially ones in high-profile neighborhoods. However, a huge mistake is assuming the cost of the home (in present condition) is a good deal. Often, parties with limited experience underestimate the costs associated to renovation and supplemental needs such as furniture, roofing, etc.
This is where a home buyer warranty can come in handy, as it protects purchasers against unforeseen expenses associated with systems and appliances that breakdown after the acquisition. For example, if a young couple buys a home, only to have the furnace stop working, this warranty will cover the cost of a repair or replacement, as long as the breakdown was caused by normal wear and tear. The warranty is applicable no matter how old the home and its systems and appliances are, so homebuyers can make their purchase with confidence, knowing they are protected.
Buying Too Soon
No listing price is set in stone; in real estate, all prices are negotiable. However, a new homebuyer, inexperienced in real estate acumen and negotiation skills, may purchase homes too soon or appear too anxious to buy, placing the advantage in the seller’s favor.
Associating the pursuit of a new home with a knowledgeable and experienced real estate agent can save thousands of dollars. Moreover, once an agent understands the general range of price, they can lead you to a number of alternatives previously unknown.
Not Knowing About Credit Scores
Once a young person turns eighteen, they can immediately begin building good credit by using a credit card to buy gas and small needs, paying the monies back each month. A credit score of 680 and higher can save a homeowner thousands of dollars regarding mortgage rates.
Terms vary, yet a score of lower than 620 usually renders one inadequate in hosting a mortgage. It’s important to know your credit score and implement methods of building good credit. This is true for both parties if purchasing as a couple.
Mortgage, depending on down payment and one’s rate, could be lower than renting an apartment or home, but one’s credit score is heavily involved in granted opportunities and rates.
Not Entertaining Alternatives
Many first-time homebuyers opt for a 30-year fixed home mortgage. The choice is conservative, providing clear expectation of financial situations. However, the stability and clear expectation costs. For some couples, living comfortably with a 30-year mortgage, the cushion inspires more consumerism.
A couple, spending during the 30 years, can find themselves in a quandary once retirement approaches, perhaps prolonging it or not providing them with the funds they’d always expected to have. Alternatively, a 15, or, if one can afford it, 10-year mortgage could tighten the consumerism purse yet provide extra freedoms in later years.
Buying a home for the first time is extremely exciting, but high emotional states can take away from cold, calculating rational thinking. Before making the biggest purchase of your life, ensure you’re not making the above financial mistakes.