CHAPTER 5 Common First-Time Mistakes
If you do decide that it makes sense for you to consider the investment of owning your own house instead of renting — congratulations! Home-hunting is exciting, exhausting, and anxiety-provoking, all with good reason. Unfortunately, many people make mistakes that prevent them from reaching their goal. Learn from these tips to avoid making costly errors that could put a hold on that “sold” sign.
NOT KNOWING YOUR BUDGET
Not knowing what you can afford is the wrong way to go into home buying. Even if you can get a mortgage on a place you really should not afford, you will be “house poor” and/or live in great debt for a long time to come. We learned from the subprime mortgage fiasco that what the bank says you can afford and what you know you can afford or are comfortable with paying are not necessarily the same. You might be able to eke out the monthly payment on that big old Victorian, but can you afford to furnish it? Perhaps the cute little Tudor is more appropriate. Ensure you have a complete and accurate budget. List all your monthly expenses — excluding rent, but including vehicle costs, student loan payments, credit card payments, groceries, health insurance, retirement savings, general savings, recreation (e.g., the gym), fees, and so on. Be comprehensive and do not overlook major expenses that only occur once a year, like insurance premiums paid annually or annual vacations, or minor ones that come up more frequently and quietly pile up in the background. Subtract this total from your take-home pay and you’ll know 29
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