How to Own Your Home (without your home owning you)-Part 1
Part 1 of 4 part series
Buying a house is one of the most exciting, most stressful, and most important decisions you will ever make. It’s likely the biggest purchase you’ll ever make for sure. Which means it’s extremely important that you are prepared and don’t rush into buying a house before you’re ready. Let’s look at the big picture here…
You’re about to spends tens, if not hundreds, of thousands of dollars on a piece of real estate that you will become fully responsible for—financially and physically. You will need to keep the property in good enough condition to maintain or increase it’s value over time. And if you finance the purchase, you will likely be spending the next 5-15 years paying it off.
A lot can happen in that amount of time. Some of it we expect, some we don’t. That’s why it’s so important to make sure you don’t set yourself up for disaster when making one of the biggest purchases of your life.
So how do you become a proud home owner without your new home owning you?
The first step in any home purchase is to make sure you are completely debt free and have an emergency fund of 3-6 months of expenses.
People get really “house happy” and go buy one while they are still in debt, or whose yet, when they have no money in savings. This sets them up for heartache and stress to say the least. When you stack a debt the size of a house on top of car loans, student loans, medical debt, credit cards, etc., you only add to the burden. And you add to it by hundreds, sometimes thousands, of dollars each month. Now what do you do if all the extra money you have each month is going to paying off debt…and the water heater breaks? What if a storm hits your new house and rips off shingles? How will you take care of the unexpected, and costly, expenses you incur if all your money is owed to someone else? And yeah – and you have no savings!
Now let’s turn this around. You’re debt free (except for your new beautiful home) and have $10-20,000 sitting in the bank for emergencies. You’re still making monthly payments, but now you’re just making ONE monthly payment. That means you’re not caught in the throws every month and you’re able to actually breathe because you’re not spending $2-3,000 in debt payments. You just have a house payment. And when, not if, something DOES happen, you actually can the money to pay for it.
It goes like this. About 2 years after buying our first house, we had some huge spring rains. One morning I woke up to discover the drain in our walkout basement had backed up during the early morning hours and now our entire basement was flooded!!! Oh and it was a mostly finished basement too.
I still remember the horror and fear I experienced when my foot hit the carpet at the base of the stairs and it squished! Thankfully, family answered the cry for help and we were able to get the water all pumped out, treasured possessions to dry land and assess the damage. The good news was nothing of value was “ruined”. The bad news…we had to replace the carpet and portions of the drywall…and our insurance wouldn’t cover it because the drain was located outside the house. That meant we had to hire a cleaning crew, buy new carpet and pay for flooring, drywall and trim installation out of our own pocket. To the tune of nearly $5,000 when it was all said and done. That would make almost anyone choke!! Thankfully, we had the emergency fund, though, and wrote the checks as the bills came. Then we saved the money back as fast as we could to replenish. If we didn’t have that savings, we literally would have been stuck with a water damaged basement and no way to remedy the emergency.
Buying a home while you’re broke and in debt is a surefire way to cause financial stress on your family, your bank account and your life in general. Next week I’m going to share a funny tip on house buying that will make a bigger impact than you realize!
p.s. If you just can’t wait to read about it, click here to schedule a call with me. I’ll get you going on the right path 😉