As a homebuyer, navigating the financial responsibilities of buying a home can be incredibly challenging. Most newer homebuyers are unaware of all the costs associated with buying and owning a home – but are quickly made aware of them if they are working with a good real estate agent. But even with the help of a real estate agent, it can be easy to make serious mistakes in terms of your finances. The following are five tips to help ensure that you don’t make these financial mistakes when buying your first home.

1. Don’t focus on distressed properties because you think you’ll find a good deal
A lot of first-time homebuyers will explore distressed properties, such as foreclosures or short sales, in the search of a bargain. If you’re looking to invest your money, then a distressed property can be a great deal. But you need to have plenty of time on your hands. If you’re actually looking for a home to move into, then you don’t want to waste your time looking at distressed properties. Deals for distressed properties not only take months to close, but the amount of money you may have to put into renovations may not be worth it. Spending all of your time looking at distressed properties could also result in missing out on well-priced homes that may have suited all of your needs. As a homebuyer, keep in mind that you are looking for a new home first and foremost — bargains are nice, but you shouldn’t be focused on finding one. Focus on finding what you love and need.

2. You don’t need to borrow the full amount that your lender is offering
Just because you are approved for a mortgage doesn’t mean you have to borrow the full amount that the lender is offering. A general rule of thumb is to borrow around 20 percent less than what the lender is offering. So if the lender has approved a $350,000 mortgage, you should consider only looking for homes priced at $280,000 or less. This will help to protect you financially. The amount offered by the lender is typically the most that they are comfortable lending to you in terms of what they think you can pay back on a monthly basis. This means that you could barely end up affording the mortgage payments if you take out the full amount — and you don’t want to be financially uncomfortable.

3. Think twice about getting a short-term adjustable-rate mortgage
A short-term mortgage is going to cost you an arm and a leg every month. Yes, you will end up paying off your loan sooner, which will help relieve your debt. But is it worth the financial discomfort? Not to mention that an adjustable-rate means that you’ll never know how much your mortgage payments might be — it could vary from month to month. A longer-term fixed-rate mortgage is a much safer play. With a fixed-rate mortgage, you’ll know exactly what you’ll be paying every month, making it much easier to budget. A long-term mortgage isn’t as bad as it might sound either. You may be making payments for 15 to 30 years, but remember those payments aren’t going to seem like that much after a decade or two since they will remain constant throughout, even with inflation.

4. Don’t use up all of your cash in order to buy the house
Make sure that you prepare for the many costs associated with buying a home, from the down payment to the appraisal fees, agent fees, lawyer fees and more. Not to mention all the other costs that you need to prepare yourself down the line, including your mortgage payments, homeowners insurance, HOA fees, property taxes and more. When saving up money, keep all of these costs in mind. You don’t want to end up emptying out your savings account by your very first day as a homeowner, as this can end up putting you in a very dire financial situation.

5. Make sure that you speak to the neighbors first
There’s a good chance that you are going to be living next to your neighbors for a very long time, so you’ll want to make sure that you don’t end up regretting putting all of your money into a home where you can’t stand your neighbors. There’s not much you can do if you end up buying a home next to a fraternity that throws wild parties twice a week or if your neighbors have dogs that bark throughout the night. This is not a situation you want to find yourself in as a first-time homebuyer since you won’t be in a good financial situation to be able to get out of it.

Being a first-time homebuyer can be both exciting and daunting at the same time. Because there is so much on the line, financially speaking, you’ll want to make sure that you do your research and speak in detail to your real estate agent in order to prevent yourself from making any potentially costly mistakes, whether it’s borrowing the full amount of the mortgage you’re offered or using all of your savings to buy the home.

Call us at 901-730-6314 to begin your home buying adventure!

A Beginner’s Guide to Home Insurance

Whether you live in a studio,  townhome, ranch style home,  or a luxurious mansion, your home is likely to be your single most valuable asset, and making sure that it is protected will help you to prevent a financial meltdown in the event of a disaster. Floods, fires, burst pipes or break-ins are just some of the catastrophes that can befall any home, and it can happen at any time, including when you least expect it. However, while losing your home to such a disaster is certainly not a pleasant experience, losing your financial investment can make the situation many times worse.

Home insurance typically goes hand-in-hand with contents insurance, and it usually makes sense to have both on the same policy. After all, the contents of a home can often come to more value than the home itself, particularly if you own a large amount of valuables, such as priceless works of art, expensive jewellery or antique furniture. Additionally, the contents is often more at risk than the actual bricks and mortar that make up your home, particularly in the case of theft and accidental damage.

The basic purpose of a home insurance policy is to make sure that you are financially covered so that you can get your life back on track as quickly as possible should a disaster occur. Nonetheless, many are negligent when it comes to dealing with their responsibility to protect themselves against any eventuality. Fortunately, most people have a legal or contractual obligation to take out a home insurance policy anyway. Anyone who has a mortgage on their property will be required by the lender to have a suitable insurance policy, since your investment also belongs to the lender. If you do not have a mortgage, and you own the property outright, you’ll generally not be under any legal obligation to have insurance, though it would be extremely foolish not to.

How Much Coverage Do You Need?

In short, your home insurance policy should cover the costs of rebuilding your home and replacing its contents should the very worst happen. You may also require a professional valuation of your property, which is something that any mortgage lender will require anyway. When determining how much coverage you need, be sure to take into account the following points:

– When estimating the cost of completely rebuilding your home, don’t think about what you paid for it in the first place. Property prices fluctuate constantly, and the cost of a rebuild, including the labour and materials required, may not be reflected by its purchase value. You’ll also need to take into account the age of your home, local cost concerns and any extensions or other upgrades that you might have made to it.

– Make an inventory of the contents of your home, paying particular attention to expensive items such as furniture, jewellery, electronics, appliances and any other valuable items. Be sure to include as much detail as possible about each item in your inventory, including estimated value, the date of purchase and a photo. For particularly valuable items, you should consider getting a professional valuation, and this may be required by the insurance provider.

– Liability coverage is also important, since it prevents you from being sued in the event that someone has an accident in your home. With the compensation culture being as ubiquitous as it is, you should make sure that you’re protected. Although a typical home insurance policy should include a considerable degree of liability coverage, those with a high net worth may want to consider an additional umbrella policy.

– The cost of getting covered varies depending on a number of factors, including the deductible. The deductible is the amount, typically a percentage, which you pay towards a claim. The higher the deductible is, the lower your premiums will be. However, you’ll also need to be absolutely sure that you will be able to pay the deductible should the worst happen, lest the insurance provider not pay out.

– If you have a mortgage on your property, do not settle for the minimum amount of coverage that they require, since this will usually only cover the value of the mortgage itself without taking into account the deposit you paid or the contents of the property.

– If you’re a tenant, you don’t need to worry about home insurance, since this will be the responsibility of the landlord. However, you will still want to take out a contents insurance policy, particularly if you have your own furniture and various other valuable items in your home.

– In the event of a disaster that renders your home uninhabitable for a period, it pays to be covered for additional living expenses. Note that additional living expenses will only be covered if an accident or natural disaster occurs and not in situations where your home is under renovation or reconstruction for any other reason.

Studying the above points will help you to determine your home and contents insurance needs and come up with an approximate sum that you can approach insurers with when seeking out a quote.

Common Home Insurance Exclusions

Unfortunately, even the most comprehensive home insurance policies still feature some exclusions, and you’ll want to thoroughly read the small print to fully understand what they are. Although policies vary enormously, you’ll find that most standard home insurance packages do not include coverage for the following:

Expected wear and tear won’t be covered, and you cannot make claims for items that wear out due to age and extensive use.

Insurers expect clients to maintain a degree of responsibility, and they will be less likely to pay out for a claim in cases of poor maintenance or negligence.

A claim won’t be accepted if it is a result of misinformation upon taking out the policy. Be honest about the state of your home, including locks and alarms.

You’ll need to let your insurance provider know about any building work, use of the place for commercial purposes or the presence of another resident.

A typical home insurance policy will require that you do not leave the home unattended for more than 30 consecutive days.

Most policies will not cover valuable items, such as laptops or bicycles, which are regularly taken away from home. These items need additional coverage.

Damage caused by war, terrorism or civil unrest is not likely to be covered by any home insurance policy.

Damage deliberately caused by you or someone living with you will not be covered, and making a claim under such circumstances could be considered insurance fraud.

The list above should serve as nothing more than a guideline, and there will likely be other things that you will not be covered for. However, many policies provide coverage for rarer disasters for an additional fee.

Non-Standard Home Insurance

While a typical modern home usually demands the lowest premiums and is rarely complicated to insure, non-standard properties and unusual circumstances can mean that you have to go that extra mile to find a suitable package. Non-standard properties may include the following:

• Listed buildings
• Buildings with thatched roofs
• Homes built with timber frames
• Buildings with flat roofs
• Prefabricated houses
• Unoccupied buildings

If your property falls into any of the above categories, you can be quite certain that a standard home insurance policy will not provide adequate coverage. If you have a non-standard home, you’ll likely need a professional survey carried out to determine its current condition before approaching an insurance company that caters specifically towards the needs of owners of non-standard properties. You should expect the premiums to be significantly higher too.

Conclusion

Price comparison websites should be able to give you a fairly accurate idea of how much you should spend on home insurance. By answering a few questions about the type and state of your home and the value of its contents, you’ll be provided with some estimates. Note that your insurance premiums will vary significantly depending on your area too: for example, areas where the crime rate is high or there is a greater risk of flooding demand higher premiums.

On a final note, do not consider the cost of the premiums to be the most important factor. Home insurance is often not appreciated until it is actually needed, in which case you’ll be extremely grateful if you have the level of coverage that you need. Taking out a comprehensive home and contents insurance policy will go a very long way in helping you and your family to get your lives back to normal in the event of an unforeseen disaster.