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- Owning your own home gives you many freedoms, but it also sometimes comes with unexpected costs.
- When house hunting and managing your home, it's important to plan ahead and build emergency savings for unplanned repairs.
- Shopping around and solid financial planning can make homes more affordable and easier to attain.
- Read more personal finance coverage.
There's something special about owning your own home. In addition to the right to paint your bedroom or living room any color you want without someone else's permission, owning your home gives you maximum control over your living space.
While it isn't for everyone and isn't for every situation, owning a home can also be a great financial decision.
I've owned three homes over the last decade or so and learned some important lessons along the way. Here are five valuable lessons I've learned from owning my own homes instead of renting.
1. Repairs and maintenance are always more than you think
When we moved into our current house, we planned on a handful of repairs from the inspection and a few small upgrades. We didn't plan on the rats in the attic, worn-out air conditioner part, or non-functioning water softener, however.
When you own a home, it seems like there's always some expense coming up. Whether it's a required plumbing repair or a planned room remodel, there's always a cost involved. Between the "want to" projects and the "have to" repairs, it's always a good idea to add room in your budget for unexpected costs.
2. Plan 10 years out when shopping for a home
My first home was a condo in Denver's trendy Capitol Hill neighborhood. I spent about a year shopping for my first home and I was very picky about a few important features. I was flexible on a lot, but I knew I wanted a place that could house a future wife and maybe even a kid or two.
It's a good thing I planned to cohabit. Not long after buying my bachelor pad, I met my future wife, who eventually moved in. People often live in a home longer than they plan, so it's good to plan far ahead when shopping around. Think about your needs at least a decade out, if not farther.
3. You'll always have to compromise on something
Do you have a dream home in mind that you just know is out there somewhere? I used to think I could find an absolute dream home, but it turns out every home requires some level of compromise.
My condo in Denver was in an amazing location but had a small galley kitchen that you had to pass through on the way to the living room, and it didn't have in-unit laundry. My house in Portland, Oregon had an amazing master bathroom but almost no usable outside space. My current house, in California, has a backyard paradise, but the master bathroom is tiny and the garage is too tight for both of our cars.
I would have loved a bigger kitchen in Denver. A bigger backyard would have been nice in Portland. And I would give a lot for a bigger bathroom and a wider garage in my current home. But sometimes you just have to pick the best home for your needs that's available and affordable at the right time.
4. Shop around for the best mortgage
When I bought the Denver condo, I went to a business associate of my dad for my mortgage. Rates were on the way down so I used the same bank to refinance about a year later. I put in a little more work for the later mortgages.
When I moved into my home in Portland, I completed three mortgage applications and took the one with the best rate, which was not from the lender I expected. For my current loan, I had to shop around for a lender that would issue a loan to someone who is self-employed with less than two years as a full-time freelancer. It was more work than I expected but allowed me to buy my little slice of California.
If shopping around saves you just 0.25%, that could easily be worth $10,000 or more over the life of a 30-year mortgage.
5. Bigger down payments make for more affordable monthly payments
When I was approved for my current mortgage, the lender didn't want to give us quite as much as we wanted. They said we needed to come up with more than $50,000 over our planned down payment to make it work. Doing so would make our monthly payment low enough to meet the lender's debt-to-income ratio requirements.
In addition to getting approved for the loan, a bigger down payment led to a lower monthly cost. Thanks to the two homes I've owned and sold for a profit in the past, I was able to afford a down payment of more than half the value of the house. That brought the monthly payment down to a very manageable cost for us.
It's nice to have a place to call your own
I hang up pictures and make little holes in the wall without thinking of landlords or security deposits. I can modify and improve my home however I want. That's a huge perk of owning your own place.
But it also means paying for your own repairs and maintenance. It means property taxes and homeowner's insurance. There are certainly strings attached. But for many homeowners, myself included, they are well worth the cost.
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