Owning a home is the American Dream. And apparently, that dream is alive and well with millennials; over 90% of millennials report they’d like to own a home.
It’s easy to get caught up in fulfilling your dream and make a financial blunder, though. But a little preparation can help you avoid that.
The American Consumer Council put together this video with financial planner Kim Curtis:
The 5 major mistakes she talks about in the video are:
1. Overestimating What You Can Afford
Many people make the mistake of looking for a house that costs about the same as their monthly rent. The problem with that is there is much more that goes into owning a home. Taxes, insurance, repairs, etc. will quickly add up, and must be budgeted into your projected monthly bills.
2. House Hunting Before Pre-Approval
Looking at houses is fun! Looking at houses you love only to find out you can’t afford them is not. Getting pre-approved will let you know what you qualify for, so you won’t fall in love with something completely out of your price range. A pre-approval also shows buyers you’re a serious looker.
Keep in my that the pre-approval is not a guarantee. You’ll also need to avoid big changes, like switching jobs or buying a new car, in order to stay attractive to lenders.
3. Checking Only Online Rates
The Internet has made shopping for mortgage rates easy, but it’s not necessarily where you’ll find the best deal. You may find many mortgage brokers in your area with similar or reduced rates, but they don’t advertise online. Local brokers will also be more helpful in getting accurate appraisals.
4. Getting Emotionally Attached
You might find yourself in a house and think it’s THE house. But getting emotionally attached will only increase your chances of paying more than you need to. Make a list of everything you need in a house, what you want, and what your dealbreakers are. You might even find that “dream house” has more of what you want and less of what you need.
5. Not Planning Ahead
Is this the house you plan to live in for the rest of your life? Do you want to rent it out eventually? Or are you upgrading in 5 years? It’s important to think about these things as you’re shopping. If you know you’re going to move out eventually, make sure it’s a home that will be an easy sell. Homes close to shopping, transportation, good schools, etc. will be your best bet for reselling.
Avoiding these pitfalls will make sure your more financially secure with your new investment. Done right, owning a home can be a great asset.