Buying a home of one’s own is a crucial milestone. All those years of working tirelessly, around the clock seem to be worth it when you collect the keys to your new home. However, the hustle doesn’t stop with the inauguration of your house. The work after your grand purchase doubles in nature. The process may become a tad bit overwhelming at first. Hence, here is a comprehensive list of first-time home buyer tips:
Assess your Budget
This may seem like a repetition of all the tedious budget allocations you made in the buying process, but it is far from what you think. According to agent Elizabeth H.O’ Neill, revisiting your budget after establishing your home is an essential step in the process of effective management.
With a home to live in, you now have a great set of costs attached, which may include the mortgage payment, utility costs, and maintenance allowance. There may be a myriad of other costs as well, which will ultimately vary from person to person. Hence, it is important to take time out of your busy schedule and work on a holistic budget, says O’Neill.
Working on a budget will not only help you identify all potential costs but also aid in allocating your money accordingly. If you’ve made the move from a rented to self-owned house, it is imperative to look out for repair costs that may crop up along the way.
A Bankrate survey suggests that an owner spends nearly $2,000 on maintenance each year, including housekeeping and minute repairs. However, this hefty amount fails to account for other major costs, such as replacing your roof or HVAC system, both of which can cross the $5000 mark.
Since these are first-time home buyer tips, discussing the course of action to deal with such a key issue is a necessity. Expert Ted Hill, founder of Freedom Financial Group in Birmingham has advised such buyers to establish a homeownership savings fund to pay for the repairs. The idea behind setting up the fund is simple:
As the cost for these repairs is not small, having a savings fund will help keep a large amount of money safe, which can then be used when need be. Your budget must also include an amount for additional upgrades, which may be used to take the home décor up a notch.
Additionally, while avoiding new debt, you should also make an effort to pay off all previous dues. Getting rid of old loans and payments will help in releasing an inflow of cash, which can then be added to your budget as a first-time homebuyer.
Upgrade your insurance
One of the best first-time homebuyer tips to date includes the idea of updating your insurance. As a new home buyer, you should not only upgrade your homeowner insurance but also start with life insurance. Investing in life insurance will be extremely beneficial for a new house owner, as it would help in providing a stream of money. This additional cash inflow can in turn be used for a variety of different purposes, including monthly expenses or tuition fees for children. (If any)
Concerning life insurance plans, O Neill has said to always buy a life insurance policy which would be enough to pay off the mortgage and cover all expenses of your family in the initial years after your death. The question that may arise: To choose a term or permanent life insurance policy?
From a bigger perspective, term life is a less expensive option as you are only covered for a specific period. A term life policy is well suited for those who are first buyers and only require coverage till the end of the mortgage period. On the other hand, permanent life insurance does not have an expiry date and offers a much greater cash benefit. The only downside is that it is comparatively more costly than the term insurance policy.
Evaluate Retirement Alternatives
Another crucial first-time home buyer tip includes reviewing your retirement plan. Buying a house in itself is a big investment. Hence, it is important to evaluate your changing budget and consider options for your post-retirement life.
How? You can start by saving up for your post-retirement life. According to a GoBankingRates report, 64% of people in America are made to retire with no money at all. If you don’t want to be included in that list, you must chalk out a plan for yourself.
For starters, you can initiate this process by determining your contribution rate to your employer’s plan and then compare it with your new budget to ensure the amount is satisfactory. Once you evaluate this amount, check the scope for this contribution to be increased.
In addition, an emergency fund can also be used for saving up money. According to Hill, saving up sufficient money that can cover expenses for 7-8 months is a fundamental need for people living in the United States.
