Attention Home Buyer’s!
Are you new to the real estate world and looking to make sure you make as minimal mistakes as possible?
In this blog I’m going to share two of my professional and personal first time home buying mistakes to avoid that dive deeper into the typical get pre-approved advice you’re used to.
Tip # 1 - Going House Broke
Mistake Number one is making yourself house broke. I’m not a mortgage specialist and ill never pretend to be. I’m just a realtor and homeowner looking to help families still be able to live once they move into their home.
Typically your pre-approval process with your bank, lender or broker will retrieve many documents from you to spit out a pre-approval amount to start house hunting budget with. But the important thing to note is that this amount is based on your gross monthly income minus debts, liabilities so on and so forth. I’m not going to go too deep into this…
The point is, from a down to earth perspective, your lender isn’t looking at what your net income is and factoring in your lifestyle, cash purchases, a list of things you need to buy after the house is in your possession like lawn mowers, light fixtures, paint, flooring etc.
When I bought my house with Dustin we purchased just a tiny amount over what I was pre-approved of on alone because we knew we didn’t want to be house broke.
We liked to eat out being that I come from the culinary world, we love to play golf. At the time of purchase he was racing a race car every weekend in Grand Bend.
We were okay with compromising on the house. One, knowing it was our first home, not our dream home and two, we both agreed we wanted to be able to still live our lives exactly how we did before we purchased the home, within reason of course.
My advice to you is yes, go get the pre-approval from your mortgage specialist! But also have the conversation of what you realistically can afford.
If this isn’t something your mortgage specialist can assist with you can simply sit down with your partner and come up with some rough numbers yourself. Total up all your monthly paychecks that actually hit your bank account, tally up your bills, food receipts, gym memberships etc etc and see what amount is left over and compare those numbers to the monthly budget your pre-approval spit out.
I think most of you will be intrigued to see the difference in those numbers.
Tip #2 - Savings
Before you even buy a house you will be told you need your down payment, closing costs and so on. But what they don’t tell you is that owning a house is much more expensive than just pre-qualifying for the mortgage and closing on the house.
Life happens and it happens at the most unexpected times. And where is that emergency fund when all your money is locked up in your mortgage payment?
Make sure you talk to a financial advisor about creating a savings plan on a monthly basis.
With the cost of living rising I know this sounds hard but you don’t have to start high. I always like to relate it back to the basics.
Do you get a cup of coffee from Tims or Starbucks each day? Maybe lunch once a week? Or buy that extra chocolate bar waiting in the grocery line up? Let’s add one of those up for the month.
Two dollars a day plus for a coffee times approx 30 days in a month equals sixty dollars, lets times that by 12 months and you now have seven hundred and twenty dollars saved at the end of the year.
$2.00+/day (coffee) x 30 days/month = $60.00 x 12 months/year = $720
$10.00/week (lunch) x 4 weeks/month = $40 x 12 months/year = $480
Why are house savings important? Let’s take my experience for example.
Our furnace was in good working order when we closed on our house and that same year, our furnace decided to die of course in the middle of a brutal winter.
Where were we going to just find a few thousand dollars out of pocket?
Well, we were given advice to save this money at the start of our mortgage and we pulled from that stash. No stress for monthly payments moving forward and we had a whole new system put in place right away.
Going back to our numbers before… Seven hundred and twenty dollars saved each year to go towards unexpected house emergencies and the advice I was given is that if you got through the year without needing it, you can use some of it to put down extra on your mortgage at the end of the year.
As a disclaimer I am not a professional mortgage or financial advisor but again an average home owner and realtor looking to give you the down to earth facts of owning a home.
If you enjoyed those tips to avoid, you may also be interested in learning 5 Things Home Buyers Shouldn’t Worry in my next blog post