First-time home buyers face a slew of concerns and firsts as they search for and purchase the right house. As they strive to obtain financing, obtain a low interest rate, find a house that meets their needs and budget, win bidding wars, and navigate closing costs, their stress levels rise.
It's no surprise that once they have the keys in their hands, first-time homeowners are ready to stop worrying and do whatever they want.
In that first year, there are, regrettably, some potential pitfalls that could cause problems and necessitate caution, forethought, and even worry. Continue reading to learn about five of the most common mistakes to avoid in your first year of homeownership.
1) Ignoring Extra Costs
Closing costs may be over, but there are still large and small fees and expenses to be paid in the near future. First-time buyers who are naive or inexperienced should not assume that their mortgage will be their only post-closing expense. Moving costs, homeowner's insurance or a home warranty, utility fees and property taxes, as well as HOA or other dues, can and should be expected for new homeowners.
The preceding list does not even begin to address starter items — tools, cleaning supplies, ladders, and light bulbs — that renters either do not require or do not require as much of.
2) Failure to Plan for the Unexpected
A thorough inspection should alert buyers to current problems, but it cannot always foresee future disasters. Damage from healthy trees knocked down by a strong storm, a two-year-old refrigerator that dies unexpectedly, an older furnace that can't keep up with record-low temperatures — these are difficult, if not impossible, to predict.
Unexpected costs can be mitigated with a good home warranty or homeowner's insurance. Even the best warranty or insurance policy cannot cover every possible scenario. That is why it is critical for first-time buyers to budget and save in order to be prepared for the unexpected. That way, if they need a new furnace in the dead of winter, they won't have to choose between heating their home and paying their mortgage.
3) Renovations Begin Too Soon
While renovating is a fun part of home ownership, it's best to wait at least a year before tackling non-urgent issues, such as redesigning an otherwise functional kitchen or bathroom.
The most obvious reason is financial. Although these are two areas that increase home resale value, even partial kitchen and bath renovations are costly. With a savings account depleted by a down payment and a mortgage payment to make, homeowners would be wise to save up before embarking on a large project.
Cost isn't the only consideration. Living in a space before renovating allows owners to gain a better understanding of how they use the space and what their functional needs are. It's easy to get caught up in the latest design trends and create a magazine-worthy kitchen that doesn't function well for your space or habits.
4) Obtaining Additional Debt
Because of the effects on interest rates and loan approvals, first-time buyers are advised not to open new lines of credit or make large purchases immediately before purchasing a home. Buyers should, however, exercise caution when incurring additional debt immediately following the purchase.
First-time buyers who aren't used to making mortgage payments, paying higher utility bills, or being responsible for the care and upkeep of their home have enough costs and worries without adding or maxing out credit cards, let alone adding new car payments or school loans to the mix.
As with renovations, avoid large expenditures on non-urgent items. First-time home buyers require time to rebuild emergency savings and ensure they can comfortably meet their mortgage payments.
5) Making a Significant Lifestyle Change
Changing jobs, having a child, becoming a one-income household, attempting to launch a personal business, or even acquiring a pet can all throw homeowners for a loop.
First-time business owners already have enough to deal with — enough costs, enough unforeseen complications — without adding another variable to the mix. Allow time to settle in, adjust to the new budget, adjust to mortgage payments, and get to know your new home, neighborhood, and neighbors before making major changes.
First-time purchasers: Allow yourself time to enjoy your new purchase and adjust to your new duties. Rushing into more debt can have disastrous consequences, including jeopardizing home ownership.
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