Healthy Financial Habits: Buying a Home

Hey, you. Good morning. It's Thursday 10am. You know what time it is – it's Coffee Chats with Candice! Grab your cup of coffee or beverage of your choice, no judgement here, and that includes your finances. I've got my black rifle coffee and my ember cup, so let's chat “Top five tips when buying a house,” First, what do you think of the new set? Let me know in the comments. I've been working really hard to try to figure out what the best look is, so let me know what you think. All right, so top five tips.

Tip number one, when you're buying a home, you want to put down at least 20%. First thing that does is it helps you from having to pay the PMI, which is the “Private Mortgage Insurance” and it reduces your overall mortgage over time. 

Tip number two is a 15-year mortgage. You want to do that because that reduces the amount of interest you pay over the life of your loan. You can pay more than double the amount when you do a 30-year mortgage, because that's spreading out the principal for so long, and the interest is increasing, like the interest amount, you know, so when you’re buying a house for $100,000, by the time you're done paying for it, it's gonna be like $300,000 once you put in the amortization of it, and after all the years, if that makes sense.

Tip number three, you want your monthly payment, which is principal, taxes and insurance to not be more than 25% of your take home pay. Some people overextend themselves, and they get into that habit, even with renters do the same thing, they get into that. Tthen when something comes up, they are stuck, and they can't make ends meet because of that. So, that's very important. Your home, your shelter, wherever you're staying, that is one of your four walls that Dave Ramsey will talk about, is that those things need to be paid before anything else. But you have to have a place to live, and if you don't have a place to live, then you're going to be homeless, and/or living out of your car or living in a van down by the river. Any of my SNL friends get that? Anyway, what you don't realize or what first time homebuyers don't realize is that your mortgage payment will go up over the course of your loan, due to rising property taxes and insurance. However, your principal payment will always stay the same unless you refinance. Your principal payment is the the amount that is going towards your home the purchase of your home. The taxes and insurance are going to the homeowners insurance into the property taxes. This always comes as a shock to first time homeowners. I remember when we bought our first home, I was 20 and it was so much paperwork, and so many things, and you have to prove all this stuff and do all this stuff, but it's been 30 years if y'all don't remember, I turned 50 last week, so it's been 30 years since we bought our first home. Trying to remember all that is not always the easiest thing, but when you're a first time homebuyer, those kinds of things, the fees and everything else kind of come up and just kind of shock you. Then when your first year comes up, after you've bought your house, your house payment goes up, nobody tells you that and you’re like, “Oh my gosh, what's going on? Why is my house payment going up?” and you start freaking out, so that’s gonna happen and you need to prepare for that as well. Kind of like rent goes up as well, but I mean, you can always move apartments or move rental homes or move duplexes, wherever if you're renting, because you are not purchasing when you're purchasing a home, you don't want to, you're not able to just up and move if you need to. 

So alright, so closing costs. Those are the fees and expenses that are paid by buyers and sellers, when they complete their purchase of their home their real estate transactions. So these costs can include loot legal fees, insurance, appraisal fees, and more. It's very important to understand these and to be able to budget for them, because you have to pay that the day that you signed the papers. For your new home, you have to pay that out so they're paid. You sign the papers, and then you write the check, and then you know, before everything's done, they have to have the check.

Buying versus renting. A lot of people say that when you are renting, that you're wasting money instead of investing in your future. Well, that's somewhat true. However, you should only buy when you're ready for that, because it can be a curse. So that's why it's important to budget for this long term purchase. Don't rush into anything, don't let any outside parties, whether it be your family, or your real estate person or anybody else that is having to do with this transaction, I mean, just kind of looking in from the outside, don't let them sway you into buying more than what you can afford. And I know that's difficult too. You know what, for first time homebuyers, you're not going to buy the same house that your parents bought, it's not going to happen. So it took your parents years to get into their position. For example, it took us 30 years of being together to be in the position that we're in, and our daughter can't think that when she goes out and buys her first house, that she's going to be able to buy the equivalent, because that's just not how it works. So anyway, I wanted to kind of point that out, too, because it's a misconception – I thought the same thing, too. When we bought our first house, we want to live in the same kind of neighborhood and do the same kind of things where we come from with our parents. Especially, when we're young and we just want to have an equal switch. Well, you can't do that. It's not gonna happen, not unless you're independently wealthy, then you don't have to worry about any of the things – I'm talking about really. 

There's so much to take care of when you're making this long term purchase. So maintenance, your lawn, your landscape, upkeep, repairs HOA. You have to buy a lawn mower, you have to buy a a weedeater a blower have to buy all these things. You also have your property taxes, your homeowners insurance, emergency repairs which will happen and when you're renting, those things are typically taken care of by the apartment. They'll take care of the landscaping the lawn, and they'll take care of any kind of repairs so that you're not out those things, but they also pay the property taxes and they also have insurance on there property. However, as a renter, we talked about before that you want to make sure you have renter's insurance, but that's not our topic for today. Anyway, so all utilities, you have to pay for those water, electric trash, internet cable, and some of those bills could be included when you rent, that's something to think about as well. You have to take in all the pros and all the cons, and where you're at in your life and your career, everything.  

All right, well, I think I've touched on everything that I wanted to touch on today. If you have found value in our time today, please comment, like, and share so that my message gets out to more people like you. That's all I have for today. I will see you next week, same time, same place for Coffee Chats with Candice where we will chat retirement! Have a fabulous Thursday and a fabulous weekend, and thanks so much for taking time out of your day to watch this video.