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Financial Topics & Tips

The house you buy may not be forever.

Because of the soundness of real estate as an investment, many first-time home buyers tend to want to get the biggest house they can. They may be trying to start families or getting more space for their existing family to grow. Whatever the motivation, buying a house is one of the few times when people try to plan their lives 30 or more years down the road.

However, that’s a really big gamble. Any number of unanticipated changes might happen in 30 years: Your job or your partner’s job may force you to move, your parents may have medical problems that need greater care, or you may decide to change careers or start your own business. This unavoidable uncertainty means it’s not in your best interest to plan for a future that’s so far away.

Look for a house that suits your immediate needs and understand that every place is adaptable to a degree. A den or an office can become a nursery, a shed can become a workshop, and a basement storage area can become another bedroom. Don’t think you need to plan your life out forever if you choose to buy a home. Make some reasonable, educated guesses about what your life will be like for the next 10 years or so, and buy the house you need for that time.

Don’t become ‘house poor’

Many first-time home buyers also fall in to the trap of figuring out the most that they could afford to spend on a new home, then spending exactly that amount. The reasoning behind this decision is simple: money spent to repay a mortgage isn’t really “spent.” Homes can be refinanced or remortgaged if money gets tight, or repaid when the house is sold. That’s sound reasoning, but only to a point. People who end up spending most of their monthly income on a house payment leave little for other debt repayment, retirement savings, or building an emergency fund. They find themselves unprepared for an unexpected medical bill or car repair. They also find it difficult to take vacations or make home improvements, which is an unenviable position.

Avoid this trap with a little financial consultation. Understand that your upper limit for housing expenses should only be a worst-case scenario. Buy the house you need, not the most expensive house you can afford. You’ll be happier in your home and in your budget.

Don’t go it alone

A lot of big national lending institutions advertise appealing mortgage specials on billboards, TV, and the radio. The rates may seem reasonable and even enticing. In reality, though, those rates go only to a small percentage of borrowers – borrowers who have exceptional credit, significant income, and a considerable net worth. As a first-time home-buyer, you probably will not qualify for the rates those large corporate lenders are using to pique your curiosity.

Given the difficulty of shopping around, make your first stop at the institution that has the best chance of giving you the best rates from the start. The Tennessee Credit Union is here to help the community, and that includes helping new home-buyers secure loans for the first time. You’re making the right decision by looking for a home during a buyer’s market. Make another smart call by speaking to a credit union representative about mortgage rates. When you’re ready to think about the step of home ownership, your first stop should be your credit union.

Visit CuCorp, Inc. Mortgage Center to learn more about the options available at TTCU.