It takes time to save enough money to be able to afford a house. However, there are many responsibilities that go into home owning outside of the initial down payment. Here are a few key things you should know before purchasing a home.
Homeownership Goes Beyond The Mortgage
The first bit of advice for future homeowners is to understand that your financial obligations go beyond paying the mortgage. As a property owner, you’re responsible for the mortgage, insurance, taxes, maintenance, and repairs. Therefore, you should determine how much these expenses will cost to ensure you’re ready to handle them once you’ve purchased a home.
There Will Be Rainy Days (So Be Prepared)
There will be times when something unexpected arises that throws your budget out of whack. Whether a pipe bursts requiring emergency repairs or you’re laid off from your job, there are many things that can set you back financially. That’s why it’s imperative to be prepared. Creating a rainy day fund is an easy way to handle unforeseen expenses. Financial experts recommend setting aside at least three to six months of expenses. You can increase your savings by opting to bank with agencies like ONE where you’ll receive 1.00% APY interest.
Reduce Debts As Much As Possible
While zero debt is nearly impossible (especially if you plan on taking out a mortgage), keeping your debt to a minimum is essential. The more outside financial obligations you have, the more difficult it is to cover your housing expenses. Defaulting on your mortgage could result in foreclosure so it’s best to reduce your debts before you buy a house.
To reduce your debts, start by negotiating better terms with creditors and service providers and offering settlement amounts for collection accounts. Then, dedicate as much money as you can to paying off debt starting with the high-interest and high-balance accounts.
Get Familiar With Budgeting
When saving for a house, now is the time to begin budgeting. A budget is your best resource when it comes to keeping track of your expenses and maintaining housing obligations. Budgets enable you to manage your expenses, monitor spending, boost savings, and ultimately reach your financial goals.
A great way to get into the practice of homeownership and money management is to create a budget that accurately reflects the expenses you’d have as a homeowner. You can use the internet to determine an average mortgage payment and get estimates on the cost of living expenses. Then, incorporate other obligations and expenditures.
Divide your paycheck into each of your spending categories and apply it to your finances. If your future living expenses are more than your current budget, simply set that money aside, so you have it once you’re ready to move.
Capitalize On Every Savings Opportunity
There are various ways homeowners can save money. Don’t hesitate to take advantage of these opportunities before and after you’ve purchased a house. There are government programs that offer down payment assistance and grants for essential home improvements.
You can also save money by bundling your homeowner’s insurance with other insurance policies, setting up automatic payments, and paying policies at an annual rate. You can use comparison shopping for everything from moving companies to home improvement contractors in order to get the best deal. Finally, use conservation methods like installing solar panels, water conservation devices, and LED lighting to save money on utilities.
Many people save for a down payment and closing costs, build their credit, get approved for a mortgage, and purchase a home without planning for what happens after purchase. Avoid the pitfalls of home ownership responsibilities by using the financial advice above and developing healthy habits before purchasing a home.
