Buying a home continues to be one of the most important financial goals for a lot of people and it is also one of the biggest expenses of our lives. For that reason, it is imperative we take a magnifying glass to our financial lives and make sure we are making strategic and educated decisions before taking the leap towards homeownership. Here are some financial tips I suggest.
Pretend you already own the house
Saving up for a down payment, getting pre-approval letters, and saving up for closing costs are probably steps you are already familiar with. However, what if you gave your new expenses a trial run? For example, let’s say you approximate your mortgage plus insurance and any additional expenses will be about $2,500 a month. For (at least) the next 6 months before you start the house hunting process, try putting away those same $2,500 each month into a savings account.
This will do two things – help you decide whether you are comfortable making those big payments each month for the next 30 years of your life and, most importantly, will provide a clear understanding of whether the expense actually fits in your budget.
Add some extra cash to your emergency fund
Most personal finance professionals suggest having at least 6 months to a year of living expenses stashed away in the event the unexpected happens. You may need more or less depending on your personal life situation (i.e.: whether you have a family to sustain or are single with no children). A popular saying with a lot of truth to it tells us that “we should always expect the best while also preparing for the worst”. Let’s say you buy your dream home and then lose your job the follow week. Or, maybe your inspector missed something that will now cost you thousands of dollars to fix yourself. Or, you or someone in your family gets sick right after that home purchase? I am sure you get the point by now. You don’t want to be in a situation where you poured your entire life savings and then some into the purchase of the house and then you wake up the next day with a zero balance in your bank account and a major life-changing emergency. Not worth it.
Invest in a quality inspector
There are tons of sites today where you can find reviews for home inspectors in your area. As frugal as some of us can be, we shouldn’t be looking for cheap deals on this one. Finding a quality inspector can save you thousands of dollars in home repairs that would be your sole responsibility after you sign on the dotted line. Check out reviews and maybe even take the time to check references in regards to someone you may be considering hiring. Probably not a good idea to just hire blindly as you want to make sure they do quality work.
There are tons of important factors to consider before embarking on the journey of homeownership. However, I consider the above some of the most important. While finding and buying a dream home can be a dream come true, it is just as important and well worth it to do things the right way so that we are able to fully enjoy the fruits of our labor.