Buying your first new home is an exciting time, but don’t let the thrill of owning your own home cause you to make costly mistakes, especially with first-time homeowners on a budget.
Expenses often creep up with the responsibilities of owning a home, gone are the days of having it fixed simply by calling the landlord (or your parents), now everything comes out of YOUR pocket!
Adding to a mortgage payment, you have your property taxes and homeowners association fees, also repairs and maintenance and so on and so forth. It’s easy to see how budgets can be pushed to the limit.
When you’re on a budget and doing something for the first time, it’s best to try to learn from the mistakes of others. To that end, here are 5 common, costly mistakes new homeowners make and how you can avoid them.
Not Shopping Around For Insurance
Many new home buyers will get insured through recommendations by their Realtor or from others without shopping around. This can be a mistake as rates and coverage vary from insurer to insurer and, with just a little time invested, you may find you can pay up to 30% or more less in premiums, which over time is a quite lot of money. You have the internet, use it, and shop around, it can really make a difference!
Overspending on Furniture & Remodeling
Most first-time homeowners have just handed over a large portion of their savings for a down payment, not to mention closing costs and moving expenses. On top of that, they are paying out more each month in the form of extra insurance, repair and maintenance, even increased utility bills.
New homeowners typically want to deck out their new place with nice furniture and renovations and make it theirs, which is fine, but when you’re on a budget it’s best to be modest at first.
It’s hard to fight it, we’re all human, but going all out on new furnishings and decor right off the bat for many is a dangerous situation for most new homeowners. As important as it is to make your new home really nice, it’s more important to be able to stay in it. You’ve made the decision to buy a home, you’ll likely be there for a long time, give your savings time to grow again and get used to the increased expenses new homeownership brings first. The new carpet, cabinets, and home theater system will still be there when you can better afford it.
Trying To Save Money By Doing Everything Themselves
Trying to save money by doing repairs or improvements you aren’t qualified to undertake can be a costly mistake. While certain things like painting or repairing holes in walls can be done by just about anyone, dangerous repairs or projects such as electrical and roofing should be left to professionals.
Your home isn’t just where you live, it’s also an investment and should be treated as such. Avoid trying to go cheap on it and not only will you protect your investment but even save yourself from injury or even death!
Not Paying Attention To Energy Efficiency
Energy efficiency is a real expense for homeowners and it’s often overlooked by many, new or not. Oftentimes new homes are bought with inefficient light bulbs or with inadequate insulation and older windows and doors that aren’t sealed properly. This can cost hundreds even thousands of dollars over time in wasted energy.
If your serious about saving money you can curb energy costs by performing an energy audit on your home. There are many resources on the internet to help you do this such as the Department Of Energy.
Not Getting Rid Of PMI (Private Mortgage Insurance) ASAP
Many first-time homeowners cannot afford a 20% down payment, so they are often saddled with Private Mortgage Insurance (PMI) which protects lenders should the borrower default on a mortgage.
This often adds $100 or more to monthly mortgage payments with no return on the cost. It’s wasted money and should be eliminated as soon as possible. The best way to do this is to make a few extra mortgage payments within the first few years of the mortgage. Once you get rid of the PMI early on, you’ll not only save that $100 a month but also greatly reduce the lifetime interest on the mortgage itself!
Buying a house for the first time, especially on a budget, is a huge accomplishment and should be enjoyed but it can be complicated. Learn from the mistakes of others and always hire the best, professional contractors you can afford when things need to be fixed and you just may find homeownership is everything you dreamed it could be and more!
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