Over the years we have seen many customers exhaust all of their funds to purchase new homes. Then the time to move comes and they end up having to borrow money to move from relatives or credit cards. I’ve also heard months later that other expenses ended up going up more than the customer planned and that ended up straining their already fragile budget. Most times these costs are not one big thing but a series of small expenses that collectively add up to much larger ones. Here are some thoughts to keep in mind when planning your home purchase. Hopefully they will help you manage your new home’s expenses.
Our simplest advice to first time buyers is: If you can’t afford it now, buying a house will not make it better. I’ve talked to countless prospective homeowners that are renting for some set amount. When pressed on their ability to save money they have some figure that they can afford. Then they go out and buy a home with a payment far greater than their current rent and savings ability. The next thing they know they are way over their heads and no able to enjoy their new home because they bought too much. In your planning process here are some hints that may help out:
Be sure to know if your house payment will be changing in the future. You may have a fixed rate loan but your taxes and insurance can change from year to year. If you are working with a reputable team of Realtors, lenders, and insurance agents, they should be able to let you know of any anticipated increases. This is particularly acute on new construction homes, fixer-uppers, or under assessed homes. You may not see the payment increases for a couple years but they can be significant.
Again, it's important to make sure you have enough funds to cover unexpected circumstances. Too many times we've had buyers completely max out their budget, only to miss their loan payments as soon as anything comes up. Plan for the unexpected!