Buying your first home is one of the most exciting and scary experiences of your life. I know that I was scared crap-less. It requires a lot of responsibility to sign a 30-year mortgage. As much as we try to focus positively on the future, we always tend to think about what could go wrong.
Being nervous is a good thing. Yes, you read that right. Being nervous means that you are preparing yourself for any situation that may arise; you are preparing for the question marks. But what if I told you that you could reduce your stress right from the start.
I will review the three pitfalls that caused the most stress while we lived in our first home. However, we were able to survive and excel. And two houses later, we know how to prepare for new home stress before we even sign the contract.
The three pitfalls that we faced were; over-paying for the house, not preparing for tax increases, and not knowing what to expect for maintenance issues. Let’s take a look at each issue and then review how to prevent them.
How to Prosper During the Next Recession
Paying too much. We paid way too much for our first home. The year was 2008 and the housing market was at an all-time high. I was a whopping 27 years old. I thought I knew what I doing. And to some extent I did. I was researching everything online and trying to get a handle on the situation. But, there is not much you can do when you overpay. If you want the full story, please drop me a line. So how do you not overpay for a home, especially when the market is at its peak?
You need to plan to pay $0 a month for your home. Only when you strive for a zero dollar mortgage will you get to the lowest possible housing expense. Zero? Yes, I said zero. There are multiple ways to get to zero, or at least near zero. You can buy a small home and get a roommate or two. You can buy a multi-family home and rent out one side of the complex, then get a roommate on your side of the house. Or, you can find a home with a finished room over a garage (frog), an in-law suite, or a place to support a mobile home rental.
Whatever the case may be, you will have to share your property. I know that most people get offended by this. That’s fine. Most people won’t have a ton of money either. Having a secondary income stream is a must for a new homeowner. You will see why next.
Living on Auto-Pilot or Driving Towards Abundance
Increasing property taxes. One of my major pitfalls was not knowing that property taxes increased. When I was studying to become a homeowner, I kept reading that a 30-year fixed-rate mortgage did not increase over the years. I literally didn’t know any different until I got my first tax bill. Yikes. And when your tax bill goes up, your mortgage goes up. But there is also a chance you get a shortage in your escrow. This means your escrow account is low and your mortgage increases even higher, on top of the new tax bill. You end up playing a wicked game of catch up. If taxes always go up, how can you prevent this from being a pitfall?
Knowing that your tax bill will increase, you will need to prepare. What I like to do is round up my mortgage bills. So if my bill is $1750, I will pay $1800 a month. The extra $50 will go into my escrow account, not onto the principle. So over the first year, you build up a nice buffer. After the first year, if you did everything correctly, you will get a refund from your escrow account. My bank sends me a hard check. I just turn around and put that right back into the escrow account. Now you are permanently ahead of the tax man.
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Maintenance issues. Whew, maintenance issues can wear you down. For those of us with kids, you can expect huge maintenance bills. I was surprised by all the maintenance because you don’t really notice the cost when you have a landlord. Things like appliances, washers, dryers, toilets, refrigerators, air conditioners, termites, pest control, fuses, rodents, etc.. Over three houses, we have seen it all. And to our dismay, we still keep getting surprised. However, there is a better way.
Maintenance issues are going to happen no matter how much you prepare. That is the first step to preparation. You need to be ready mentally for something to go wrong. There is no reason to get mad or cry. The second step is to pay as little as possible in housing by following the zero dollar mortgage principle. This will allow you to build a nice little nest egg. Finally, buy as many new appliances as possible, and get a 5-year warranty on them. I know this seems extreme, but the first 5 years is crucial to your health. If you have a new washer, dryer, refrigerator, dishwasher, and hopefully air conditioner, you will be almost worry-free. This is why it is vital that you aim for a zero dollar mortgage. Money doesn’t solve all your problems, but boy does it solve maintenance issues.
Hopefully, this opened your eyes a little to what to expect when buying your home. Money, money, and more money is the key to surviving the first couple years. The zero dollar mortgage is the way to go. Housing is the biggest expense of most Americans, so if you can lower that to near zero, you will have the keys to the kingdom of life. Little problems like taxes and maintenance will be easily solved because you will have the resources to do so. Trust me, I have lived broke in my first home and had a zero dollar mortgage in my third home. I will take the zero-dollar-mortgage-life any day.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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