Home ownership is a completely different affair from renting and is more expensive than you initially imagine. Set up a phantom expense account to determine if you're ready for the transition.
Photo by woodleywonderworks.
Over at the financial blog The Simple Dollar they highlight atypical things you should do before buying a house. Among them they offer this advice about setting up regular savings for at least 24 months prior to purchasing a home:
A mortgage payment requires financial discipline as well as enough money, period. Can you cover the mortgage? The insurance? The taxes? The constant expenses that go with homeownership?
Use a mortgage calculator to figure up what your monthly mortgage payment will be. Tack 50% on top of that for insurance, taxes, and other expenses. Subtract your current monthly rent payment from that.
If you can't save that amount each month, then you're not ready to buy a house of that size.
People will give all sorts of reasons why such a statement isn't true.
"You really don't need that much money each month." Let's hear that refrain again when your hot water heater fails at the same time as you need a new lawnmower and your lawn needs re-seeding.
"Our lifestyle will be different when we own a house." In what way? The only major change will be that you have less spending money and, most likely, more room to store stuff.
Such statements are merely ways to pass the buck on to your future self, the responsible one who owns a house and makes more money and makes all of the payments. If that person doesn't exist now, merely owning a house won't make that person exist in the future. Don't ever base your plans on what you hope might happen someday.
Take responsibility now. See whether or not you actually can make it work in terms of your month-over-month finances. If you can't do it now, then you won't be able to do it then.
While nobody likes to hear advice that might point out they aren't ready to taking on the financial burden and risk of home ownership and it certainly isn't sexy advice, it's valuable. Speaking as someone who — as an almost brand new home owner — had his furnace completely die a week before his wife was about to give birth at home in the middle of winter, you should never underestimate the expense of home ownership and its surprise bills.
For more advice on atypical things you should do before considering buying a home, check out the full article at the link below. Have your own advice for prospective home owners? Let's hear about it in the comments.
Four Atypical Things to Do Before You Consider Buying a House [The Simple Dollar]