A financially secure homeowner

The financial responsibilities of home ownership go well beyond the payment of a monthly mortgage and recent home buyers are often caught off guard with the numerous costs they encumber when purchasing a new home. The impact of maintenance costs, homeowner’s insurance, property taxes, association dues, utilities and other resultant obligations are often overlooked when searching for a home to buy. Prospective home buyers should carefully avoid over committing to the purchase of property outside their financial reach. Buying a home is a long-term commitment and unforeseen changes in life conditions can make it difficult, if not impossible, for an unprepared homeowner to meet their financial obligations. However, a few proactive measures can help a prospective home buyer become a financially secure homeowner.

Establishing a realistic budget prior to purchasing a home 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 home. A homeowner’s inability to build a financial reserve in preparation for potential unknowns, can further complicate matters. Prospective home buyers should take the time to work with a mortgage lender while familiarizing themselves with all costs borne in home ownership. Buyers who’ve taken the time to examine the financial nuances of owning a home often benefit from the insight.

Home buyers 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 aligned within their price range. Buyers should begin their search at the lower end of their predetermined price range, incrementally progressing in price until a home matching their search criteria is found. Once a home is found, there is little need to continue the search.

Buyers who’ve attained a loan pre-approval prior to making an offer on a home are better positioned to negotiate manageable terms. When submitting an offer to purchase, prospective home 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. A home buyer’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 often 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 need to remember a home must appraise if they’re working with a lender and they should be careful not to submit an offer exceeding the home’s value.

Finding a home may take time and buyers are strongly cautioned not to allow desperation to permeate their search. It’s not uncommon for buyers to encounter unforeseen complexities when searching for a home and they potentially could find themselves competing with other home buyers in multiple offer situations. 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 a demanding market, can also prove problematic. Serious home buyers 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.

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

Sean and Aimee McDonald, realtors with RE/MAX North Lake Tahoe, can be reached at 775-250-8335 or mcdonaldrealestateteam@gmail.com.