Lessons Learned From A Home Ownership Dream Gone Sour

February 17, 2015

Recently, I was talking to a friend and she told me that she was selling her home because her American Dream of Home Ownership has become an American Horror Story. She then sighed and said if only she can go back and advise her former self. I asked her what she would say and she began sharing her lessons learned.

The first thing she would had done was to not get so emotionally invested in the idea of having a home and to look at home ownership in terms of how it fits into your current financial situation. She did not take the time to do a budget to track her monthly spending to see how a mortgage would fit into her finances in good times and in bad. She only compared the mortgage, which was principal and interest, to her rent which was the same. She did not factor in taxes and insurance, increased utilities, home association dues and the cost of repairs.

Lesson learned: factor in ALL of the costs of home ownership to include the mortgage, interest, insurance, taxes, estimate of the utilities, extra travel expenses, basically any cost associated with the home. Then review your budget to see if these cost work with your budget or if they stretch your budget like a pair of pants after a Thanksgiving Day meal.

The second thing she wished she would have done was to think more carefully about her location. She remembered hearing that you should look for the best house you can afford in the best neighborhoods. Instead, she fell in love with the largest house in a not-so-great school district and convinced herself that the house would still appreciate in value. When the recession hit, her home was worth half of what she paid for it.

Lesson learned: Analyze the location, looking for good school systems to appeal to a wider buyer base.

Most importantly, she wished she would have ignored the hype that the best time to buy is when interest rates are low and realized that the best time to buy is when your finances are in order and you have an emergency savings account to cover unexpected expenses.

Lesson learned: On top of having a down payment, also make sure that you have an emergency savings account for the unexpected expenses that pop up- like unexpected car or home repairs.

Had she put her newly found wisdom into practice years ago, she said her horror story would have been a dream come true. How about you? If you have any lessons you’ve learned, feel free to share them in the comments section below.