Homeownership continues to be a dream but you should never forget one thing: your home loan payments should be secure. While we all want to be own the house that we live in, there are a lot of things that could go wrong if you are not careful. A lot of us never thought that the housing market collapse last 2007 would cost us our properties. Instead of owning our homes, we had to move out of them and rent for a couple of years just to escape the mortgage problems that became too much for our budgets.
Well we can put all of that in the past now. Although the economy have yet to fully recover, there is a growing optimism when it comes to the housing market. Gallup.com conducted a survey that revealed how homeowners are more optimistic because they see that the value of their homes have steadily risen. In fact, 74% of Americans said that this is a good time to buy a home.
While that means we can move on from the economic disaster in the past years, that does not mean we should forget about the lessons learned. We need to keep in mind how our home loan payments were jeopardized that eventually led to the loss of our homes.
Home buying mistakes that can cost you your mortgage payments
There are certain home buying mistakes that you need to avoid because they can end up compromising your ability to meet your monthly amortizations.
BusinessWire.com discussed the most recent homeownership survey done by Chase and it revealed the common regrets of people who have bought homes in the past two years. Here are some of the issues that we got off of this report.
Bigger is not always better.
Homeowners realized that bigger, in most cases, is not always better. Not only are they more expensive to purchase, they are also more costly to maintain. The survey mentioned that 39% of homeowners would like to buy a different size of home and one in a different neighborhood based on what they know now about homeownership.
We have to admit that homeownership does not only make us financially secure, it is also something that we can brag about. It is the ultimate proof that we are financially successful – at least, in our mind that is how we feel. But if you think about it, unless you own 100% of your home’s equity, there is nothing to brag about. That being said, you need to keep your eyes from the size and concentrate on the type of home that you will need. If you know that you can live comfortably in a small house, then that is what you should buy. Size is not supposed to reflect how successful you are. If you live in a home worth $250,000 that is fully paid, you are better off than one who lives in a $500,000 home with an equity of 25%.
Lack of knowledge can be costly.
All articles or experts imparting tips about buying a house will tell you to research about the whole process thoroughly. You may think that since you will be working with professionals (real estate agent, mortgage broker, etc), you can rely on their expertise to get you through the whole buying process. That is not entirely beneficial. You still need to learn about the process so you understand what is at stake. In the end, it will still be your decision and you need to be able to make it independently of any opinion given to you.
Research about your mortgage options – especially your home loan payments. You do not want to pay more than what you should because you did not know that there is a mortgage option that has a lower interest rate.
You should also know how to research the market value of homes in the location you want to buy a home in. That way, you can negotiate the price with the seller without relying too much on the real estate agent.
Another important concept that you need to research on is the closing costs. In most cases, you will be spending on the closing costs from your own pocket. Make sure that you are prepared for this expense so you will not be forced to increase your loan just to complete the home buying transaction.
Homeownership is expensive.
It is true that living in your own home will get you to save on rent. While that is true, you need to realize that there are expenses that you have to shoulder as a homeowner. If you are not aware of this and you failed to factor them in when applying for your mortgage, it could jeopardize your ability to make home loan payments. Among the expenses that you need to pay off include property taxes, home insurance, and seasonal or yearly repairs and other maintenance costs. If you live in a multi family dwelling, you may have to add homeowner’s association fees in your list. These expenses can add up and pull you under if you are not careful.
How to secure your monthly home loan amortization
So the question is, how can you avoid having these homeowner regrets? You want to avoid them because it could lead to your inability to pay for your mortgage amortization. It is important for you to realize that your job and the economy itself can affect your ability to pay off this debt. For instance, an article published on BusinessWeek.com in 2008 revealed that homeowners bailed on their home loan payments when their balance became bigger than their value of their home.
You cannot control these instances but there are some things that you can do to help you ride out these financial storms without the need to give up your house. The home prices will go up. You just have to set up a backup plan in case it happens. Here are some of our suggestions.
- Secure your source of income. First of all, make sure your income is secure. You can do this by setting up multiple sources. That way, when one fails, you can rely on the other sources to give you financial aid.
- Boost your emergency fund. Dealing with a financial emergency does not have to lead you in debt or make you miss out on home loan payments. While everything is going smoothly, make sure that you increase your emergency fund to help you survive these instances.
- Time your home renovations. Renovations is a part of homeownership. However, make sure that you time it properly. Save up for it regularly so that when something suddenly breaks down, you do not have to borrow money to be able to afford the repair. You can dip into a home maintenance or repair fund.
- Make wise debt choices. We are not going to say that you keep your hands off any other debt. If the debt can help put more money in your pocket, that is something that you can grab. But despite that make sure that you will take on debt that will not compromise home loan payments in any way.
Homeownership is great all in all. But it is only rewarding if you eventually get to own your home’s equity 100%. Otherwise, it can all be lost after one economic crash.
If you are currently struggling with too much debt, here is a video from National Debt Relief that discusses the specific steps that you need to go through to be debt free.
Diana hates debt just as much as you do. She is a finance writer for National Debt Relief. She aims to provide the best information to win the battle against debt.