You can shop around for lenders, and you should
My wife and I have always used Bank of America for just about every aspect of our financial lives, so naturally it was to the B of A down the street from our apartment that we went when we were ready to buy a house. It frankly never occurred to me to shop around for other lenders — interest rates were set at the federal level, so one lender is as good as any other, I figured.
I figured wrong. Lenders will compete to get your mortgage, and if you have loan numbers on hand from a number of different financial institutions, you can usually negotiate better rates that will save you lots of cash over time.
The home inspection is wildly important. Pay for a great inspector because they will be worth it
When my wife and I bought our first home, we knew little about the process and put our trust in our realtor to walk us through the process.
One step of said process was getting the house inspected, which I thought was more of a formality. I went with a rather cut-rate inspector, figuring it was an easy way to save some money and that, being as he was licensed, he had to be just fine, right?
Not so much.
Our inspector failed to find severe rust and rot afflicting all of the plumbing in the crawlspace under our house. Literally the first night we were there a pipe failed, sending water flowing into the crawlspace and sapping all pressure from every faucet in the home. We paid thousands in repairs that should have been the responsibility of the seller, or at least a negotiating point in the contract.
The closing costs can be brutal
The price agreed to during a home sale can be a good deal less than you actually end up paying. In fact, closing costs can end up being as much as 5% of the price of the sale, though often they are closer to 2%. Still and all, even on a $226,800 house (that's the median home value), 2% amounts to an extra $4,536, money that could be used in myriad other ways.
And if you were hit with 5% closing costs on that median value home, you'd be hit with an extra $11,340 to pay out. Consider using a closing cost calculator to give you a better sense of what might lie ahead.
The ongoing cost of owning a home can go way up long after the purchase is complete
No one is under the illusion that once you pay for your home, you're done spending money on the place. But beyond the obvious expenses of utility bills, the mortgage, and upkeep expenses, the annual cost of owning your home can surge if property taxes rise. And property taxes can increase both based on improvements you make to the home as well as when the area in general is reassessed.
My wife and I saw our annual property taxes go up by almost 35% over the course of two years and now annually pay several thousand dollars more than we had initially expected. If we had known how much the costs of simply living in this house would total, we may well have spent differently while building the house, keeping more cash in reserve.
It's impossible to plan for all of the expenses of homeownership
The responsible homeowners go into the process already having budgeted for the monthly mortgage payments, the interest, the gas, water, and electric bill, the likely cost of property maintenance, and so forth. And maybe you have even set money aside for costs you know you can't always predict, like a broken appliance or a roof leak.
But what about a roof leak and your sewer line cracking at the same time? That's just one of the times we dealt with major repairs beyond the scope of our abilities at the same time. Your home emergency fund should be big enough to cover not one but at least two sizeable repairs simultaneously. It's OK to not literally keep a separate account or cash under the mattress, but as you budget each month, know that some of the money you think you have might quickly disappear into the home.
You can actually do all sorts of repairs and improvements yourself, no professionals required
Before owning a home, I had never replaced a light fixture, rewired a dimmer switch, installed a garbage disposal, or repaired a ceiling. And I'd never laid sod, put up a fence, or hung a new door, either. I was used to having those and so many other projects handled by professionals paid for by the company that owned our apartment, but once on our own, and having recently spent so much on the house itself, I decided to try my hand at being handier.
Turns out, I'm pretty handy. And in the days of YouTube and WikiHow, you're probably pretty handy, too. So try the DIY approach yourself and see how much you can save. Just make 100% sure you know how to shut off the right circuit before doing any electrical work.
Don't rush into homeownership, because you can't rush out
The first home we bought was perfect. It was affordable enough for our budget and on a piece of land big enough for an addition when we got pregnant. And the market soared shortly after the purchase, too. But I have a number of friends who wish they had held off much longer than they did, staying with renting and choosing a home with more patience.
As Alex Pettee, president of Hoya Capital Real Estate, told me, you need to "understand the value you place on 'optionality' as it relates to renting versus owning."
"Renting gives you the option to pick up and move relatively easily, but home-owning makes sense if you plan to stay in your home for at least five years," he said.
