In our previous post, we talked about bidding wars, the emotions involved and how easy it is to make rash decisions that you’ll literally pay for sooner than later.
Even in cases where you’re not competing, it’s easy to fall in love with a home, look at everything through rose-coloured glasses and forget the fundamentals of home buying.
So, let’s take a step back and walk through 5 simple ways to help you avoid a financial (and emotional) train wreck:
At the very least, start your house hunt knowing the maximum mortgage and purchase price you can afford. While this isn’t where your financial planning should end (see below), it will hopefully prevent you from looking at homes out of your price range and, as a result, scrambling at offer time to borrow money to make the deal work. Know your limit and play within it!
Consider Your Lifestyle
A pre-approval tells you the size and length of mortgage the bank will approve. What it doesn’t take into account: your yearly Caribbean vacation, your 3 dinners out a week and your $6-a-day venti skinny cinnamon dolce latte
addiction habit. These little expenditures add up quickly and, if you’ve maxed out on your mortgage, you may find yourself strapped for cash.
Now Consider the Hidden Costs of Ownership
Sure, there’s heat, hydro, home insurance, property taxes. But what about yard care? Decor? Add-ons, such as decks and patios? Cleaning supplies? While you may not be able to forecast everything, always leave wiggle room in your budget for these kinds of costs. Speaking of which…
Emergency Fund: Start One Now
Stuff happens: your car breaks down, your furnace blows, your get laid off. Strongly consider opening a savings account where you consistently and automatically (set it up with your bank) add reserve funds in case life throws you a wicked curveball. Even if you never need it, it promotes good wealth-building habits – win-win!
Don’t Waive Your Home Inspection
Sure, waiving your home inspection can be the difference between winning and losing a bidding war. However, if a critical issue is missed as a result, you could be in for a world of financial hurt: asbestos, furnace issues (a fun winter surprise!), leaks in the foundation – all costly repairs that could have been avoided by a simple $500 home inspection.
Some workarounds if you’re competing and absolutely can’t do a post-offer inspection: work out a deal with a home inspector for multiple inspections and have them tag along during showings (a pre-offer inspection) or, at the very least, ask a handy friend or family member to tour the home with you and CHECK EVERYTHING: the windows, the floors, the ceilings, move small appliances on kitchen counters to check for cracks, lift up rugs – everything.
A home is a great investment that you’ll enjoy for years to come. Follow these steps and enjoy your home even more knowing you’ve planned for virtually anything home ownership can throw your way!