Home ownership is an achievement that many people within the United States hope to accomplish. The sense of freedom and stability in owning a piece of land and decorating your sanctuary they way you want is alluring.
But, the costs with owning a home can be overbearing. And major cause of stress.
In last week's episode of Keeping Up with the Kardashians, Kylie shared that she wanted to move out of her mother's home and have a place to call her own by the time she turned 18.
A reasonable request given that Kylie has been working her butt off as a model and wants to use her earnings to invest in a property.
However, as Khloe and Kim candidly pointed out to her, there is a lot that goes into owning a home and Kylie could be setting herself up for a disaster.
In addition to the purchase price, there are a number of ongoing fees associated with homeownership. Kim emphasized the importance of having earthquake insurance (a must-have if you live in California), fire and flood insurance, and home owners association dues that can run upwards of $1,000/month.
And not to mention that maintenance costs of owning a home. You are now in charge of the gardening, electrical work, and rattlesnake fencing. I guess Khloe has had some not so good experiences with rattlesnacks in the past.
Depending on your situation, your monthly payments to maintain your home can be considerably higher than your original mortgage payment calculations.
Here are five questions you should ask yourself before purchasing a home:
- How long do you plan on living in home? If it's under three years, it may make more sense to rent until you want a more permanent location.
- Have you reviewed your credit? Be sure to run your credit report and take note of any blemishes that may raise red flags for your lenders and thereby raise your interest rate.
- Have you researched all of the costs of owning a home? In addition to figuring out how much your mortgage will be, calculate the additional fees and be sure you can manage all of the expenses.
- Are you pre-approved? Before you start going to open houses and falling in love with homes, reach out to a mortgage broker to walk you through the process of getting preapproved. It will save you a lot of time in the future and gives you a clear idea of how much you can afford to spend on a home.
- Can you do your own laundry? No offense to Kylie, but if you don't know how to separate your whites from the darks, you should probably stay at home for at least another year.
And a final note for you if you own a small business. As small business owners, we can choose to write off a number of expenses in order to reduce our tax liability. However, when you are purchasing a home, the lender will want to see a business that is thriving. Be sure to keep that in mind as you decided which expenses to write off against the business as well as making sure you keep detailed financial statements of your company.
For more guidance on tax filing, check out this simple guide from Xero. A beautiful accounting software made for creatives.
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Danetha Doe is a financial psychologist and founder of Money and Mimosas. A former accountant, she launched Money and Mimosas to help ambitious creatives learn about personal finance, accounting and how to run a business like the rich and famous. Connect with her on Twitter @danethadoe.