You cannot wait to buy a home to make it your own – possibly tear down some walls for an open floor plan or build a pool in the back.
But before making plans or spending money, it’s a good idea to understand all the costly missteps homeowners make their first year – or even right before – owning their home.
“The most important thing truly is location when you choose a home,” says Cat Brown, broker manager of Move In-Out Real Estate, Inc., in Cedar Rapids, Iowa. “However, you need to think about if that location of your dream home and its location will cost you more time and money.”
She had a couple who found a home 45 minutes from where they work. They had two kids in school. A year later, they called her to sell the house because the stress of driving in the winters and the cost of wear and tear on their vehicles and gasoline were getting too much. There will be a lot of financial things to think about when you decide to buy a home.
Here are some of the things to not get trapped in your first year or right before owning a home:
Buying a house at the top of your budget
You get preapproved for $400,000. But you would feel much more comfortable with $300,000. “Don’t get suckered into buying a house for as much as you are approved for by the lender. Don’t become house rich and then house poor because you can’t afford to do anything else accept pay your mortgage,” Brown says.
Not knowing what things cost
When newbies go looking at homes, they reject a good built home because of the orange shag carpet. “But they shouldn’t worry about the cosmetics,” Brown adds. “Yes, replacing carpet and painting walls do come at a cost. But look at how the home was built first.”
The things that really cost to replace once you move in can be anything from the foundation to the roof to the furnace. Make sure your realtor knows how much a new toilet costs, putting in wood floors or getting a new water heater.
Not understanding the cost of property taxes
Depending on the neighborhood, homes just a few blocks from each other can have drastically different property taxes. Brown has had many clients choose a home in their specified location without taking into consideration the astronomical cost of the property taxes and insurance each year.
Sometimes, you can choose a house that is more expensive but it has much lower taxes. For instance, one house may be $400,000 with taxes at $13,000 a year. In the next town over, a home is priced for $500,000 with only $5,000 taxes.
Not getting a home warranty
Many times, sellers offer home buyers a year of a home warranty in case any big appliance breaks down. Those expenses in your first year can be huge if you need to replace an air conditioner, refrigerator or something else big. Brown has had one several years in a row, and the cost of the warranty had paid for itself. Just make sure to research the warranty companies. They aren’t all the same.
Not looking at the layout or your future
You plan on having children soon, but the house you just bought has the kids’ bedrooms on the second floor but the master is located on the first floor. Do you want to be a floor away from your baby? It would be costly to change things in the structure of the home. Also, if you eventually plan to have your mother or grandmother living with you, think about whether or not they will be able to climb stairs.
Not keeping a budget for buying furniture
Brown suggests to her first-time homeowners to buy a few good pieces of new furniture to center the rest of your hand-me-down pieces given by family and friends. Or you can take some time to get great deals in consignment and thrift stores. That avocado green chair you find in an antique store can fit in great with your décor by simply buying a slipcover. Don’t go crazy by opening up new credit cards to buy a whole house full of stuff.
Not having an emergency fund
Personally, Brown believes having at least six months of income put away can keep anyone safe when an emergency pops up like losing a job or getting sick. If you don’t have an emergency fund, she says to sign up for a disability insurance policy that is tied into your mortgage. “It’s not that much per month to pay, and if something happens that you can’t keep up with your payments,” she says.
Not repairing small problems
You suddenly have a mouse problem in your home. It’s time to see if there are any holes from the outside that is allowing these critters to get in. You might even want to call in an exterminator before a bigger infestation happens. The same philosophy should be heeded with whatever problem occurs like a small faucet leak or clogged gutters. If you ignore these situations, they could cost you a whole bunch of money down the line.