So you’re going to buy a house? That’s exciting! Fantastic! Good for you! One of the smartest things you could do. I’ve done it, and there’s some real excitement, and there are some challenges, and there’s a couple of pitfalls, so I want to share some information with you to make this a better experience for you.
Specifically, I want to start by talking about what the bank has done so far, so I’m going to assume that you’ve been pre-approved. Let’s say they gave you a $250,000 approval. That does not mean you should go buy a $250,000 house. That means that’s the most the bank is comfortable that you can pay monthly, so I would say work towards lower. The lower, the better. If it’s your dream house and you’ve got to do it cool, I get it but go into it with that lower mindset.
We do not want to hit the top. You want to try to stay conservative with this because there are other concerns and considerations, specifically the insurance and the taxes. When my wife and I first bought a house, it was on undeveloped land. It was a neighborhood that was still being built. It was a tiny piece of vacant land, and the property taxes on it were next to nothing. After we built our house, this was probably about 20 years ago, the taxes went from just under $200 to $4,000 per year. That dramatically affected our lifestyle because we did not figure, had no idea, that that was going to happen. So, that’s one thing to keep in mind which is what happens a year down the road after you move in, it’s not just budgeting for right now but also budgeting for the future.
You’re going to also need to have home insurance that is to protect you from a fire, a hurricane, etc. There are all kinds of different types of home insurance. And then, potentially where you live, there’s also a potential for mandatory flood insurance. Something else to keep in mind is that close to one-third of flood claims, at least in Florida, occur in non-flood zones which is crazy. If you’re in a non-flood zone, I’m going to strongly urge you to get flood insurance because non-flood zone insurance is typically very reasonably priced. However, if you are in love with a certain house, you should be mindful of the fact that, if it is in a high-risk flood zone, you could potentially have a staggeringly expensive flood insurance cost.
The per month dollar amount could completely derail your ability to pay your mortgage. These are important considerations, so talk to your realtor, talk to your insurance agent, get quotes on house and flood insurance. Calculate what the taxes will be not just this year, but also next year. When you’re pretty confident you’ve a great house candidate, call your insurance agent and say, “Hey, give us a quote on our amazing new home! “. You owe it to yourself to know that you’re making a solid economic decision. By doing the right thing early on, you’re enabling your family to also move forward with your finances and setting yourself up for a great future. I just want you to do it right and have a great foundation so when the day of the closing comes and you walk through the threshold that it’s the greatest feeling in the world! I want it to stay a positive feeling because you know exactly what the costs are going to be. So, congratulations!
Hopefully, I’ve answered your questions. Any more questions? Let me know what you need, what answers you want, and I’ll happily provide them. Please feel free to call or come by our office to discuss your future home. Your insurance agent is a critical part of getting it right and we’d be grateful to help you make it happen!