Two Musts When Purchasing Your First Home
Summer is here, and so is home-purchasing season. Just this week I had two families reach out to me to walk through questions they had about purchasing their first home. They wanted to make sure they were thinking about things the right way and not making any common mistakes that a lot of people make when they purchase their first home.
Buying your first home is a very exciting time! You finally have a place you can call your own and make your own. And yet, the process can be very stressful your first time through with a lot of new things you need to know and learn. However, a little planning can go a long way to minimize the stress and increase the excitement.
There are a lot of do’s and don’ts when purchasing your first home, but I’ll share just two helpful tips to keep in mind:
- Make sure you have a healthy emergency reserve in place, ON TOP of the cash you will need for a down-payment, closing costs, and escrow when you buy your first home. Don’t deplete your cash accounts completely just to get into your home. The last thing you want to be feeling is “Phew! We had just enough cash to get into this home!” and not have anything left over for emergencies.
When repairs are needed, the bill is your responsibility now, not your landlord’s. So, make sure you have extra cash for those repairs and emergencies. Next to your marriage, a home purchase may be one of the biggest financial commitments that you make in your life since most people take out a 30-year mortgage. For big commitments like this, you want to be prepared. Imagine how much more stable and comfortable you will feel buying your first home with an appropriate savings cushion and safety net.
- Take the time to budget. Many people I talk to focus on the initial purchase of the home (making sure they have enough for the down payment and closing costs), yet don’t consider the additional costs of home ownership.
After you move into your new home, you may have additional utility or cable payments; you may need to purchase a lawn-mower or snow-blower; and even if you found your dream home, once you spend a couple days in it, those curtains start looking out of place, or the land-scaping really needs a good sprucing.
I’m a big fan of taking pride in your home and enjoying new home projects and updates – but take the time to budget and save for them first. All too often, I see families get really excited about home ownership (which you should be!) and rush to do fun projects, yet fail to plan for them properly and end up accruing high-interest credit card debt.
The simple process of jotting down those additional expenses and project costs and thinking through if you need to save for them will go a long way to being better financially prepare and help keep you from making common first-time home buyer mistakes.
If you can keep these two simple ideas in mind, you will be on a much better footing and foundation (see what I did there?) for your first home purchase, and I bet your stress will decrease and excitement will increase.
Let me know if you can relate to this post, and feel welcome to reach out with additional questions about buying your first home!
About the author:
Joseph Cramer, CFP, Financial Planner
Joe, a lifetime Michigan resident, graduated from Trinity School at Greenlawn and the Carlson School of Management at the University of Minnesota with a BSB in finance, risk management, and insurance.
He appreciates working with young professionals and families, especially those in the medical community. His areas of expertise include: holistic fee-based financial planning and coaching; asset protection strategies in the areas of specialty-specific disability insurance and life insurance; debt management; tax deferred strategies for funding education and retirement; and, wealth management.
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