The Considerations of Financially Savvy Homeowners


For many would-be homeowners, the purchase of a new home represents the American dream.  However, the financial responsibilities encumbered in ownership go well beyond the payment of a monthly mortgage.  Unsuspecting homebuyers are often caught off guard with the numerous costs associated with owning a new home.  The impact of maintenance, homeowner’s insurance, property taxes, association dues, utilities and other obligations are often overshadowed by the excitement of acquiring a new home.

Buyers must take precautionary measures to avoid accidentally overcommitting to the purchase of a property exceeding their financial grasp.  Buying a home is a long-term proposition and unforeseen life changes can make it difficult, if not impossible, for those unprepared to meet their financial obligations.  However, a few proactive measures can help homebuyers make financially savvy decisions. 

Establishing a realistic budget prior to purchasing and operating within predetermined budgetary constraints is imperative.  Overextended homeowners often find themselves short on discretionary income because they’ve become financially overcommitted to their homes.  A homeowner’s inability to build a financial reserve in preparation for potential unknowns, further complicates matters.  Prospective homebuyers should take the time to work with a mortgage lender while familiarizing themselves with all costs borne in ownership.  Those who’ve taken the time to examine the financial nuances of owning a home almost always benefit from the knowledge and insight.

Homebuyers who understand the relationship between price and a monthly mortgage are better equipped to be more productive in their search as they can concentrate on homes aligning within their respective price range.  They should begin their search at the lower end of their predetermined price points, incrementally progressing until a home matching their search criteria is found.  Once the right home is located, there is little need to continue the search.

Would-be homebuyers who’ve attained a loan preapproval prior to making an offer are better positioned to negotiate manageable terms.  When submitting an offer to purchase, buyers should account for comparable home sales in the surrounding area while also considering the length of time the subject property has been on the market.  It’s important to be competitive, but offering more than a home is worth can prove problematic.  Further, a homebuyer’s position to negotiate is benefited greatly by knowing the local real estate market’s conditions.

Working with a real estate professional knowledgeable about local market conditions generally proves beneficial, as does seeking the opinion of a real estate appraiser to ensure the value of a selected home is aligned with the agreed purchase price.  Buyers should remember, a home must appraise if they’re working with a lender and they must also be careful not to submit an offer exceeding the target home’s value.

Still, finding a home can take time and buyers are strongly cautioned not to allow desperation to permeate their search.  It’s not uncommon to encounter unforeseen complexities when searching for a home and buyers may potentially find themselves competing with other homebuyers in multiple offer situations.  This can be frustrating, resulting in a homebuyer making erratic decisions.  

Buyers who arbitrarily purchase a home not meeting their needs may find doing so proves costly in the end.  Desperate times don’t necessarily equate to desperate measures and although flexibility may be necessary, those who’ve overcommitted out of desperation may become trapped by their decision.  Buyers shouldn’t be discouraged if they don’t immediately find a home, as new listings frequently come on the market; sometimes being patient pays off.

However, being overcautious especially in demanding markets, may also prove problematic.  Serious homebuyers shouldn’t procrastinate when the right opportunity is presented.  Having predetermined criteria in advance of initiating a search for a home, can help establish realistic parameters from which to work.  Admittedly homebuyers may have to compromise, but they should base their decision to submit an offer on facts relating to the subject property and not a knee-jerk emotional response.

In recent years, there has been a growing interest in purchasing homes that are fixer uppers.  Enhancing a home’s appearance and functionality has been touted by a diverse number of home improvement shows.  Arguably sometimes there are financial gains to be had; however, buyers mustn’t overestimate their ability to make repairs.  Renovating a property and making alterations can be an expensive and difficult undertaking and most repairs are time consuming, and at best, inconvenient.  

Homebuyers considering the purchase of property in need of repair should evaluate what challenges they are willing to accept.  They must be realistic and not ignore problems beyond their abilities.  A home in need of repair may provide an opportunity to negotiate, but oftentimes a move-in-ready home is a better deal given the costs, time and skills necessary to effectuate repairs.

It goes without saying, buying a home is a big decision and understandably emotions play an ever-present role.  However, homeowners who proportionally expend a significant percentage of their total incomes on home ownership, or owe more than their home is worth, could find themselves overcommitted because they didn’t consider all the relative costs before purchasing.  

Successful homebuyers formulate their searches around their financial constraints and thus are better equipped to negotiate and make informed decisions.  Prospective buyers who carefully evaluate each of the costs borne in purchasing a home, are better positioned to become financially secure homeowners. 

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