March 11th, 2013
In a Zillow blog post, “First-Time Home Buyer? Here’s What Not to Do,” the staff of the financial website LearnVest offers some sound advice for first-time homeowners who are feeling the pressure to buy now while mortgage rates are low.
While you definitely should take advantage of the mortgage if you can, LearnVest has three things you shouldn’t do in the process.
1. Don’t buy a house if you aren’t sure you’ll stay for long. Experts suggest buying based on a five-year forecast. In other words, you should make sure that you want to stay put for at least five years before making the investment, otherwise you could actually lose money in the long run.
2. Don’t bite off more than you can chew. When shopping for a home, it can be hard to wrap your head around the large numbers, and in the big scheme of things, $10,000 extra for certain amenities doesn’t sound like much. But when you do the math, that’s at least $50 extra a month. While that doesn’t sound like much, it could make a big difference if your financial situation changes down the road.
LearnVest suggests getting pre-approved, and then cutting about 20 percent off the approval price to be safe.
3. Don’t forget about the extra costs. The mortgage payment is just a slice of the cost of owning your own home. Don’t forget insurance costs, property taxes and maintenance expenses (which you should estimate to be 1 percent of sale price each year) plus the added utilities and closing costs.
If the seller seems to be open, ask them for an estimate of such expenses so you know whether you can afford it.