House, For sale sign.

House Buying – A Big Commitment

Buying a house is a big commitment. While one of your first steps (after saving money for the purchase) is to speak with a mortgage professional, they will provide you with an overview of what their formulas say that you can afford. Before committing to buy a home, it’s important to consider some important financial factors:

  1. Travel – Whether you’re young or old, you probably have thought about or want to do some travelling. Whether it’s a quick trip to a beach, a trip to the famous land of a mouse, a cruise or travel to an international destination, we all have a rough idea of the type of travel we would like to do. It’s important that you keep your travel budget in mind as you’re committing to your home purchase.
  2. Maintenance – Most people think of home maintenance in regards to their heating, air, water heaters, etc. One of the expenses that often goes overlooked is landscaping. Whether you’re cutting the grass yourself or, due to time constraints (or other reasons), hire someone to do the landscaping for you, it is an expense that can add up quickly. Having someone do lawn maintenance for you can run (depending on location) $30 or more each week. Mulch is also an annual expense that many first-time homeowners can overlook.  Be sure to understand what path you’re planning on taking with regards to landscaping and other routine home maintenance projects.
  3. Pools – Depending on your location, pools can be a great addition to your home. Obviously, it’s important to consider where you live in determining the role a pool plays in home ownership. Due to the climate, pools in Florida are very common. They’re much less common in Michigan. Whether you live in Florida, Michigan or any of the other states that we work in, it’s important to consider the pool maintenance and servicing, energy and insurance before diving in.
  4. Children – Are you planning on starting a family in the next few years? If so, it’s important that you consider the future expenses associated with raising a child. If both of you are currently working and one of you will stay home with the child(ren), there will be less income to go around. If both of you will continue working, it’s important to factor in daycare costs to help determine what your cash flow will look like.
  5. Budget – What do you currently enjoy doing for fun? Concerts? Sporting events? Dining out? Movies? No matter what you enjoy doing, it’s important to keep those expenses in mind when you’re purchasing a home. While it sounds great to say that you are willing to give up those fun things in life so that you can purchase a home, it can be very difficult to follow-through with giving them up.
  6. Retirement – It’s important to remember to save for retirement. While a retirement focused goal financial plan can help you pinpoint exactly how much you should be saving, depending on your age, it will likely fall between 10-20% of your income. If you are purchasing your home with a 30-year mortgage, it’s not logical to think that you will make up the savings later in life. Plan accordingly.

Home ownership can be a wonderful way to help build long-term wealth. Make sure that you cross your t’s and dot your i’s in understanding how the purchase will affect your budget and finances.