Buying your first home is quite the adventure. From the exciting realization that it’s happening to the moment you walk through the door, it can all go by pretty quickly. But getting too caught up in the real estate-buying process can lead to big mistakes -- costly ones. Just as a home seller will be able to move their property more quickly if they properly prepare their open house, home buyers can make a smart purchase when they prepare thoroughly. Arming yourself with the financial knowledge of experts who have been there can keep your bank account -- and your sanity -- safe.
Compare Location vs. Transportation Costs
In a lot of urban areas, you can buy a bigger house for less money if you move out into the suburbs. However, when you factor in the costs of a daily commute, they end up with the same monthly total expenditure compared to buying a place in the city. In fact, a recent analysis estimates the average homeowner could buy a house priced more than $15k more for each mile they move closer to work. Based on an IRS estimate that the cost of an average car driving one mile runs around $.51 a mile, a 40-minute commute each way costs $19 a day. The thousands of dollars you spend annually on commuting could be put toward a mortgage for a place closer to work, and you wouldn’t be spending almost two hours a day, five days a week sitting in traffic. Furthermore, foregoing the commute and opting to drive less, bike to work, or use public transportation is better for the environment -- something we should all care about.
Buy Below Your Means
The subprime mortgage crisis was the result of a lot of things-- low interest rates, bank weakness, and an inaccurate societal view of a house as a good investment are just a few. A big part of the problem was people were buying more house than they needed, which led to them living beyond their means. The bigger your house, the more you are going to end up paying in upkeep. Taxes, insurance, and utilities cost more with greater square footage, and the more there is, the more chances there are for something to go wrong. And you can’t rely on finding a house selling below its asking price -- only 2.2 percent of homes in Dayton sold below their asking price in the last month.
Those looking to buy property -- especially first-time buyers -- should actually buy less than they think they need. Buying a smaller home that is significantly less than what your income qualifies you for gives you plenty of room to save for the future. That extra money you save on maintenance costs can be spent on the lifestyle you want rather than the upkeep of a bigger house than you need. And while families need space, they need money more than anything. This is an easy way to start squirreling away that cash you will need for your child’s education. Finally, going for a smaller home means you can house hunt in the best locations, which is the one thing that will maintain a property’s value no matter what happens to the market.
Ask an Expert
Financial planners and advisors may be the unsung heroes of the modern age. While you may hear “financial advisor” and picture some slick guy in a suit who wants to pressure you into buying stock, that’s not necessarily what you will find. The right financial planner can provide investment advice, sure. But what you are looking for is an advisor who will go over your income and assets, talk to you about your goals, and provide you with a plan and budget that will help you get there.
Buying a home is a huge commitment -- don’t get caught up in the excitement! While you may think it’s better to spend less on a house further out, you could be saving money and your sanity finding a place close to your job. A smaller house is going to give you the room you need to save for your goals. Finally, the tailored advice of a professional financial planner can more than make up for the cost of your initial meeting.