5 Tips for Not Going Broke When You're Buying Your First House
People of all ages want a house. But as with most things, buying a house is expensive. Really expensive, actually. When you’re in the pursuit of a home to purchase - not just rent - money will be the biggest factor in what house you get and when you can purchase it. There are many different parts of the purchase process as well, and it could be easy to underestimate how much you’ll need to spend and how many different things you’ll have to buy. So here’s five tips on managing your money and not going broke while purchasing a house.
Build your credit
Part of qualifying for a mortgage is having the minimum credit score your loan requires. If you don’t have a lot of experience with credit, then you probably won’t have a very high credit score. Not that your credit is necessarily bad, you just might not have any. If that’s the case, you’ll need to build your credit from scratch, more or less.
However, if you have bad credit, you need to find a way to build it up to something good again. Of course, this is easier said than done. Begin by doing your best to pay off whatever debt you do have and getting into wise spending habits. Good spending habits - all credit aside - will be useful while you’re looking to purchase a house.
Make (reasonable) adjustments
Speaking of wise spending habits, start today. My good friend just bought his first house, and when I asked him what spending adjustments his wife and him made, he responded with this: “we made sure that each of us only purchased one item a month that was ‘selfish.’ For example, I like playing video games, so I allowed myself to purchase one game a month. My wife loves makeup and makeup accessories, so it was the same for her.” He told me that they tried to create a budget where they could have fun as well as responsibly save.
I thought this was really smart, but even then, he told me he had to wait quite a while before buying a house. When he thought his wife and he were ready and had saved enough, they discovered that they actually still had quite a ways to go.
Even so, make adjustments reasonable. You can still have a little bit of fun should you choose to. But do be realistic. Buying a house will probably take more time than you want or expect, because you may not be able to afford a home as soon as you would hope. Ask yourself how long you’re willing to wait and budget accordingly.
Save extra for your first home
You’ve heard about the importance of saving money, and hopefully, you were doing this before you thought about buying a house. You need a backup fund, however, and should be collecting more than you “need.”
Just think about it. If something happens that hurts you financially - like an extra cost you weren’t expecting - you’ll want to have back up funds that don’t further halt your quest for a permanent home. So save extra - more than you need to, and more than you planned on.
Consider what your first house will cost you
The cost of buying a house includes its usage, so make sure you’re thinking beyond just owning the house. Take into account what you’ll have to spend money on in repairs and maintenance because those can be spendy debts on their own. Every house has some extra costs, as everything will need repair or replacement at some point.
Something else to think about that will cost more: what goes inside of a house. Particularly, furniture and wallpaper or paint. If you buy a house and intend to live in it, you probably do not want it to be empty. Furniture, however, costs money, as do appliances, kitchenware, washer and dryers - most of the things that families typically keep in their homes. Wallpaper isn’t usually too expensive, unless you go custom (often used for a child’s room), in which case it can be around $500 or more per room (based off of average bedroom sizes recorded by the NAHB). Have some money for this so you won’t be struggling to fill and set up your house months down the line after you move in. Oh, and don’t forget about the costs and hassles associated with moving to your new home.
I asked my friend, who I mentioned earlier if he had any money management advice for people who want to buy a house someday, and he responded that we should have goals. “Money is like anything in life, it can easily be wasted on crap that you won’t care about in a day, month, or a year. Like working out, you should have a goal in mind in the short term, but also think about the long.”
As I get older, I’m coming to understand this better. I’ve found myself for a long time spending money on things I don’t need, that only satisfy me in the short run. Recently I’ve picked up a little bit of responsibility because I have bigger short term goals I need to save for over a couple months. I do want to buy a house someday, though, and I’d like to pay off my car. I’d also like to be a successful business owner at some point. Adhering to long-term goals will not only help me to not go broke but to have more purchasing power some day as well. And that’s a bigger deal than I like to give it credit for.
Think you're ready to buy? Get tips and advice in our first-time homebuyer center.
Robert Lanterman is a freelance writer based in Boise, Idaho where he writes about costs and hassles associated with moving to your new home. You can chat with him about your experiences on Twitter @robolitious.