Buying a Home: Being Informed and Astute is a Great Way to Survive the Process
Thursday, June 28th, 2012
Metropolitan Life Insurance (6) (Photo credit: Wikipedia)
Going into the home buying process without the right tools, professionals, and information, can be a real disaster for many people. They easily fall prey to greedy local governments, issuance solicitors, and even a rough housing market. It doesn’t have to be that way, however, especially if homeowners follow a few simple pieces of advice from Elliman CEO Dottie Herman and real estate expert Eric Tyson. The pair recently shared some time on Herman’s “Eye on Real Estate with Dottie Herman” radio show, and discussed the best things to do and know, both before and after buying a home and closing the deal.
Before Committing to a Purchase
It’s no secret that homes are generally the single most expensive investment that a consumer will ever make. For this reason, Tyson urges consumers to “look at [their] overall financial situation to figure out how much house [they] can truly afford.” That’s a pretty good point: Picking a large home is great, and it might even be possible to make a sizable down payment on it, but the home’s monthly payments can quickly become a burden, especially when considered in the context of utility payments, property tax assessments, and overall maintenance costs.
Consumers need to know how much they can afford both in the near-term and in the long-term, considering things like the expense of having children when weighing a mortgage payment amount. Those plans will directly impact finances, and they should be examined before the potential buyer assumes a large payment. If the recent economy has taught consumers no other lesson, it has taught them that foreclosure is a very real possibility and they should make a pragmatic and common sense decision to avoid it.
Living Stress-Free After the Purchase
While many homebuyers might think that actually buying the home and closing a deal is the hardest part of home ownership, the truth is that this is really just the beginning. From that day forward, homeowners will need to pay for insurance, fend off solicitations, work with local governments when paying taxes, and ensure that their savings account is robust enough to save them from the brink in the case of an emergency. Indeed, buying a home is a long-term commitment to proactive ownership and financial responsibility. Tyson and Herman have a few general suggestions for homeowners that will help them avoid the stresses and headaches of home ownership quite easily.
Be Wary of Insurance and Financial Solicitations, and Know Which Ones to Choose
New homeowners will notice that their mailbox is stuffed with offers from banks and other companies offering mortgage insurance, financial products, and all kinds of things that require home ownership and a bit of equity. Most of these should simply be avoided. In fact, even though it has a nice ring to it, even mortgage insurance should be avoided. Instead, Tyson urges homeowners to pursue a classic life insurance policy instead. That’s because the life insurance policy covers actual income and net worth of a person, rather than the cost of a home or an individual’s contribution to paying down those costs.
As he says in his radio conversation, “the life insurance decision comes down to ‘how many years’ worth of your income are you trying to replace?'” Life insurance has many more real and tangible benefits than the more specialized mortgage insurance offering, and it’s a far better investment for homeowners to make with their money.
Make Smart Financial Decisions for Payments and Savings
Owning a home is, whether consumers like it or not, all about money. To that end, electronic debit should be setup when making mortgage payments. This is a great way to make sure that every payment is on time, which will spare homeowners the frustration of paying a late fee or getting a negative mark on their consumer credit report. Because a mortgage is often considered the highest-value debt a person can have, it’s important not to do anything that could place heavily weighted negative remarks on a credit file at all.
Part of ensuring a mortgage’s integrity over the long-term is developing a reserve fund of money that can be used in the event of a financial emergency. Sometimes referred to as an “emergency fund” or “rainy day fund,” consumers should commit to having between three and eight months’ worth of expenses placed into a savings account that they do not touch unless an emergency situation happens. That situation might be a medical emergency, unemployment, or another issue, but these funds should be used for nothing more than paying down debt, making mortgage payments, paying utility bills, and meeting basic expenses.
Remember to Relax and Enjoy the Privilege of Home Ownership
Finally, both Dottie Herman and Eric Tyson recommend that homeowners take a little time each week to sit back, relax, and enjoy the view. There’s really nothing better than owning a home and maintaining a piece of the “American dream” and, despite all of the associated stresses, homeowners need to remember that it’s all worth it. They need to remind themselves that they made a sound investment. And they need to remember that they’re doing all the right things to pay down that mortgage, maintain their investment, and get the best return on every aspect of their financial portfolio.
Want more tips on increasing the value, and enjoyment, of your property?
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Sincerely,
Kevin Grenier REALTOR®, ABR® SRS® (Accredited Buyer’s Realtor, Seller’s Representative Specialist)
780-893-0269
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