Today we have another guest post from one of our blogger friends, Kristi Muse. Take it away Kristi!
October 1, 2009 my then soon to be husband and I purchased our first house. We used his Veterans Affairs loan benefits to buy the house with no down payment. All we had to pay was closing costs. Coupled with President Obama’s $8,000 first-time home buyer’s tax break incentive, we thought we were making a great investment.
Why pay money towards rent every month when our money could instead build equity in real estate? As most couples are when buying their first property, we were ecstatic to begin this new phase of our life together. We were fools. We didn’t know the first thing about homeownership. Here’s my advice to anyone thinking about making that leap from renter to home owner.
Document Each House You Visit with Detailed Notes and Pictures
The home buying process goes by so quickly. The agent takes you to upwards of 20 homes in one day, and all of the houses start to blur together in your memory. Make sure to take a print out of the listing for each house you walk into. Write detailed notes on the listing sheet and take a lot of pictures. It’s really helpful to have a hard copy of the listing to reference along with pictures to swipe through when the time to make a decision comes.
Have at Least a Basic Understanding of Home Repair Costs
Homes that require a total overhaul could leave you drowning in home-repair debt down the road. To make the best decision possible, you need to understand what construction and repair actually costs. Talk to a contractor like Roof Worx LLC before making the decision to buy a house that needs a lot of repair. When budgeting for a renovation, you will realistically need at least $2,000 more than anticipated per project. Especially in older homes, construction issues present themselves as the project goes along. Add these costs to your listing price to get a better idea of what your mortgage will actually be once renovation loans are added in. Otherwise, when combined you may find yourself struggling to pay both the mortgage and the loan payments.
Stay Firm on Your Budget
Don’t let your agent pressure you into buying a home that is more than you are comfortable spending. Real estate agents always tell you that you could lose the house if you don’t jump on it. They’re right, but don’t let that fact sway you.
Buying a house at the high end of your budget is a decision that shouldn’t be made lightly. Take time to consider what that mortgage payment would mean for your daily life and spending. If it’s absolutely your dream home, then go for it! Just remember that the agent gets a bigger paycheck when you spend more. They have a real incentive to push you outside of your financial comfort zone.
Background Check Your Home Inspector
Before finalizing the paperwork on the house, we paid $300 to a home inspector to verify that there weren’t any major problems with the home. We didn’t look at any online reviews of his work before writing the check to him. He gave us a list of about 10 basic things that needed to be fixed. Our agent passed the list on to the homeowner, who supposedly fixed the issues. The inspector missed so many critical problems with the house that, cumulatively, it cost us about $20,000 to repair all of the issues. Research your inspector with the Better Business Bureau, Angie’s List, and even just Yahoo reviews. See what people say about their work before you hire them to inspect your home. The time spent will be worth the effort.
Don’t Buy a New Home Unless You have Money for a Down Payment
Having money for a down payment means that as soon as you hold that key to your new home, you’ll be well on your way to building equity in the home. If you utilize a VA loan, by the time your principle has gone down, the value of your home may have gone down as well. After 6 years of paying the mortgage and a depreciation in home values in our area, we would still owe the bank if we sold our home. We now owe more than it’s worth. Put as much money up front as possible. You’ll spend less on interest in the long run, and you will have built equity much faster.
Editor’s note: I made this same mistake too! Luckily, my house hasn’t depreciated, so I’m not underwater.
Don’t Buy a New Home Unless You have Money for a Substantial Emergency Fund
Much to my dismay, I quickly learned that home warranties apparently don’t cover all kinds of damages. Day one of home-ownership we discovered that roots from the massive trees on the property had invaded the plumbing of the house. We had to pay $3,000 to have 5 trees and 6 stumps removed to fix the plumbing issues. We didn’t have $3,000, so it had to go on the credit card. It took us 3 years to pay off that debt. Make sure you have a substantial amount set aside for home repair emergencies, otherwise you find that your debt extends beyond that of your mortgage.
Learn From Our Rookie Mistakes
We were young and completely naïve when we bought our first home. In hindsight, we never would have bought the property if we knew then what we know now. We wouldn’t have bought a house outside of our budget, or one that needed so many (unknown to us at the time) repairs. We definitely would have chosen to rent for longer. The mistakes we made ended up costing us nearly $20,000. Make sure you have the financial stability necessary for the responsibility of owning a home. If you don’t, you could find yourself facing a mountain of homeownership debt.
Have you bought a home? Did you make any mistakes?
Meet Kristi Muse. She is a freelance writer, blogger, police officer’s wife, and mom to two beautiful children. She loves homeschooling, organic gardening, sustainable living, and cooking from scratch. To hire Kristi as a freelance writer or to read more about how she lives a balanced life visit her website at Moderate Muse. You can also follow her on twitter @moderatemuse.