While some individuals are still wondering should I buy a home now, others are fully immersed in their pursuit of the American Dream and are enjoying the fun associated with buying a home. There is nothing like the thrill of buying a home to stimulate the senses as the process can certainly be an adventure, however, first time home buyers can easily have their enthusiasm tamed if proper planning was not part of the scenario. No matter where a home is situated, avoiding common mistakes can help minimize the risk of future financial problems.
Spend Money Wisely
Part of the thrill associated with home ownership is the process of making a house of home. Decorating with a personalized color palate, remodeling and filling rooms with furniture and other decor generally create the transition. While some homeowners may thrill at the chance to set up their perfect palace overnight, it is important to acknowledge that all decorative touches will add up and if left unchecked can result in spending way more than expected. That shortsightedness in financial planning needs to be curtailed in order to ensure enough money is still available for handling the mandatory expenses associated with home ownership.
In the long run, homeowners experience a net worth 41 times greater than their renting counter parts courtesy of the ability to build equity (National Association of Realtors). However that perk can only be achieved by having the proper resources to pay mortgage monthly payments on time and by properly managing the additional expenses associated with home ownership. First time home buyers may forget that paying property taxes, insurance, water bills, landscaping expenses and fees for trash collection is their responsibility and are therefore encouraged to minimize the home shopping expenses in order to be better financially prepared for the costs associated with property ownership. Planning for a financial adjustment period is a smart strategy that should be implemented for first time property owners.
Take Care of Business
One of the greatest perks to renting a home is that a landlord is responsible for the maintenance of a property, however, homeowners are solely responsible for the upkeep of their new purchase. In order to prevent small problems into developing into major headaches, homeowners need to commit to property upkeep from day one.
If left unattended, small leaks can develop into rushing floods, small tree roots can grow large and damage foundations, unkempt lawns can lead to huge and costly legal battles with strict homeowners associations and prepping a home for winter can prevent unplanned emergency expenses. That is why new homeowners must commit to upkeep from the get-go and spend the required funds needed to ensure cash hemorrhages down the line.
Take Advantage of Tax Breaks
Tax breaks are considered one of the greatest perks of home ownership. Since the introduction of the nations’ first official federal income tax structure in 1894 interest paid was deemed tax deductible. While the tax system was tweaked repeatedly since that time, mortgage interest as a valid tax deduction has remained relatively untouched.
Additionally, the Internal Revenue Service (IRS) also allows for deductions in regards to property taxes (AKA real estate taxes) paid, point payment deductions (where applicable) and even some expenses if a home is both a primary residence and provides a legitimate home office. The IRS defines a home as place that "...includes a house, condominium, cooperative, mobile home, house trailer, boat, or similar property that has sleeping, cooking, and toilet facilities." For properties that meet those qualification, to claim the appropriate tax deductions associated with home ownership, filers must complete Form 1040 and itemize your deductions on Schedule A (Form 1040).
