After diligently saving for years while renting a cramped apartment, you finally have enough money set aside to make a reasonable downpayment on a property. Getting pre-approved for a mortgage and starting to tour properties can lead to home buying fever.
If left untreated, that fever might push you into making some questionable decisions in your eagerness to own your own home. The real estate buying process involves one of the biggest investments of your life and is therefore fraught with all kinds of risks, some of which are impossible to predict. However, one of the most common mistakes that homebuyers make is something that you can plan to avoid.
Buying a house should not empty your savings account
Getting the most amount of house for your money or the best value possible can look like different things to different people. For some people, square footage is what matters the most. Others care about proximity to amenities or the move-in readiness of the house.
Regardless of what features you prioritize the most, you need to be realistic about what you have to spend. It is natural to want to take everything you have saved and use that as a downpayment. However, if you do that, you won’t have anything to protect yourself if something unexpected happens.
You want to retain an emergency savings account that contains between six and 12 months’ worth of living expenses or at least your mortgage costs for that long. That amount will protect you if you lose your job or encounter other hardships, like a furnace that fails during the first big snowstorm.
Backup financial resources are crucial for homeowners
No one but you will assume responsibility when something breaks or stops working at your home. You will either need to be able to pay for repairs or find a way to finance them. Even if you have a great real estate agent and pay for a top-notch inspection, you have no way of knowing when a pipe might burst or a tree could come down on your house, requiring that you pay the deductible for your homeowner’s insurance.
Without a savings account, you could be one car accident or lay off away from foreclosure. Additionally, you might have to use credit cards to finance repairs to your property, which might lead to lasting financial difficulties. Making good choices early in the home buying process will set you up for success as a new homeowner.