First-time Home Buyer's Financial Tips

What steps do you take to protect your first home investment? Once you collect your new house keys, your budgeting and financial planning don't stop once you've found and purchased the property. As you have been doing so much work, the process should go smoothly. Obtaining a mortgage requires determining your income, saving funds, and applying for a home loan. The process can be stressful and painful. free and clear found that 75% of people compared mortgage acquisition to a dentist visit or physical examination.

You can continue to build a solid foundation for your future by following these steps to secure this pivotal point in your financial life.

Budget Review

After just going through the home buying process, it can seem daunting to consider developing a financial plan for the new homeowner. However, it is an important step. The cost of owning a home should be fully covered in your budget when you sit down and work out a budget. In addition to your mortgage payments, you may also see an increase in utility bills, HOA fees, and condo fees, along with maintenance and repair expenses. In the case of a recent transition from renting to owning, these two factors are significant. For first-time home buyers, repairs such as leaking toilets or broken windows can be a rude awakening.

Whether you are maintaining and upkeep the home, landscaping, housekeeping, or making minor repairs will influence your sale price. While that amount might cover smaller expenses, it does not cover some of the bigger ones you will face when you become a homeowner, such as replacing your roof or an HVAC system.

In order to cover more extensive repairs, prospective homeowners should set up homeownership savings account separately from the down payment. In order to be prepared for these expenses, we recommend keeping $5,000-$10,000 cash at all times.

Upgrading budget

If you plan to update your bathrooms or kitchen, you'll also need to leave room for upgrades in your budget. The latest US Houzz & Home Annual Renovation Trends survey finds that homeowners spent $15,000 on renovations in 2020, with the median amount being $15,000. According to the survey, about one in three homeowners would finance their projects with credit. Over 80% of those surveyed paid cash, however.

Paying off existing debt should be prioritized along with avoiding new debt. Your budget will have more breathing room if you eliminate car loans, credit cards, or student loan payments.

Make sure your insurance is updated

First-time home buyers are required by law to have insurance on their homes, but there may also be other insurance types they need, such as life insurance. The concept of life insurance is similar to that of a self-completed plan. As long as the proceeds from insurance are tax-free, you can use them to pay off your mortgage if you pass away. Leaving your spouse with debt is not something you want to do if you're married. If you have children, life insurance might also be useful in helping to cover your children's college expenses.

It is essential that you have enough protection on your life insurance policy to cover your family's costs after your death. The choice between term and permanent life insurance may be a question you have.

Term Life

As you are only covered for a specific period of time, term life is the least expensive option. As a first-time buyer, you may find this type of helpful insurance as long as you have a mortgage.

Permanent Life

Whole life and universal life insurance provide cash value accumulation and last a lifetime, but they can be costly. A licensed insurance broker or agent can help you determine which is best for you.

Prepare for retirement by reviewing your plan

Your other financial goals shouldn't be neglected after you buy a home, even if your budget changes and increases. Retirement savings are included in that. It has been reported by GOBankingRates that over 64% of Americans anticipate retiring broke.

401(k) and similar retirement accounts at work may offer you a higher contribution rate. To determine if the amount is sustainable, compare it to your newly updated budget and see if you can increase it. A Roth IRA or traditional IRA can be substituted for a 401(k) if you do not have access to a 401(k). You may also want to set up college savings account for your kids and save an emergency fund for housing-related expenses.

How Should I Proceed After Buying a House?

You should continue to save for unexpected household expenses after purchasing your first home, such as the cost of installing a new window.

Final Thoughts

You can avoid becoming overwhelmed when you purchase a home by planning ahead. It's ideal for preparing yourself financially before buying your first home; however, planning is still important if you get a late start. If you want to make a budget, you have to track where your money goes, so you understand how much you should budget. Taking a closer look at your spending is a good investment if you're not saving much after buying a home.

Contact Timberstone Homes if you're ready to begin your home buying process. We have experienced realtors in Lafayette, Indiana. Our team will assist you throughout the process so that you can find the home that is right for you. For more information, visit our website!