First Time Home Buyers And Payment Shock!
Earlier this week I met my clients at my office to meet with our Coldwell Banker Mortgage Professional to have them get their pre-approval redone by her. The first person that "pre-approved" them disappeared on my clients and they never received a pre-approval letter.
So, she pre-approves them and they go into payment shock. They currently pay $1200.00 in rent and their mortgage payment would be $1700.00 including everything.
They went into payment shock as most first time home buyers do. They knew their mortgage would be more than rent but didn't expect a $500.00 difference. Unless you are going to put down a lot of money, expect your mortgage payment to be close to $2000.00 per month here on Long Island.
I told them to go home and sit down and figure out what they spend for day to day living including fun activities.
They called me yesterday and told me they can handle the $1700.00 by cutting out needless items they have been spending on, on a monthly basis. And that put them into spending shock.
Here are some tips to help you find some new found money:
- Coffee - Did you know some people spend an upwards of $300.00 a month on Starbucks alone? Seriously, do you really have to spend that much on coffee? No.
- Clothing - Look in your closet. You really do have enough clothing. Why buy more than you need? That could save you a few hundred a month.
- Movies - Around here you will spend $13.00 per ticket and forget about the popcorn, soda and candy. You can easily spend $50.00 per couple each time you go to the movies. If you go a few times per month, you are looking at a minimum of $100.00 Put your cable bill to use and watch movies on HBO and Showtime. Movies are shown on those channels faster than ever so it's worth saving that money on going to the movies.
- Eating Out - This is a huge expense. Write down how much you spend a month on eating out. Most times, people find this is where most of their fun money goes to. Most find this is where they can close the gap between their rent and mortgage payment. Voila!
- Car Payments - Do you really need to get a new car every 3 years? No. Keep that car you have for a while and get rid of those car payments. Unless you have a business, leasing is not worth it. If you have a regular car loan, keep the car after those payments are gone. Is status symbol really worth not owning a home? Of course not. Equity outweighs a Mercedes.
- Lottery Tickets - Ok, we all know the odds are against you winning this one! Some people will spend $100.00 a week for years and years on these things. If you sit down and figure out what you spend on lottery tickets, you will need a brown paper bag in order to breathe.
Some will look at this list and think, "why should I downgrade my quality of life?" Coffee and lottery tickets are not a quality of life. You are throwing away money, period! If cutting out these un-necessary items will get you into your first home then it's worth it. Buying a home is the best investment you will ever make.
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