Most people get so wrapped up in the process of buying a house that they fail to think about their financial life after the purchase. One of the biggest mistakes a buyer can make is to buy too much house. When this happens the mortgage payments and other general house maintenance costs overwhelm them almost immediately. Avoid this mistake by considering the following advice.
Make a Budget
The best way to understand if you can afford to live in your new home is to make a budget that reflects all of the cost of a home. This is especially important to first time homeowners, who will now have to cut their own grass, pay gas, water, electric, sewer, etc.
This is a simple step that many people over look. Unfortunately, during the process no one will educate you on personal financial management. Additionally, houses seem to have a sixth sense when it comes to your budget. Nothing goes wrong until things get financially tight when borrowing short term loans, and then everything goes wrong. Furthermore, if you choose to defer maintenance many home problems simply get worse and become even more expensive to fix.
Plan for Capital Expenditures
Whether you are a first time homeowner or moving from another house, there will need to be large expenditures to get your house just the way you like. These items will range from new furniture to a kitchen remodel to window unit air conditioners. Don’t forget, large items will break down in the house as well. Saving 5% of your paycheck every month can curb some of these expenses. Consider a home warranty to protect you from big ticket item breakdowns like the furnace or the roof.
Planning capital expenditures is important because your house is an asset. The more smart money you put into it, the more money you will eventually get out of it. Some capital expenditures may also be tax deductible. Check with your tax preparer to see if you can get money back for upgrades. Don’t overlook anything here because items as small as efficient toilets can be written off.
Understand Your Mortgage
For those of you choose an Adjustable Rate Mortgage, option mortgages, interest only mortgages, etc., make sure you understand the rules regarding your loan. If there is a point in time where the interest rate may change, causing your monthly payments to increase, circle that date on your calendar.
Don’t let housing maintenance cost steal your home buying joy. Good planning can save you a lot of heartache after the mortgage is over.