3 Purchases To Hold Off on When Buying Your First Home
Written by
Laura Gariepy
Edited by
Amber Barkley
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Your real estate agent called and said that you’re clear to close on your first home! Finally, all of your budgeting, planning and hard work has paid off. In just a few weeks, you’ll be able to move into the house you’ve been dreaming about for years. It’s a huge milestone — one worthy of celebration.
However, after enjoying a nice dinner out to mark the occasion, you should use every penny in the bank carefully. You must resist the urge to make any major money moves until you finalize your home loan — and spend some time in your new space.
Here’s a look at three types of purchases you should hold off on as you buy your first home.
Everything You Think You Need
When you move into a new place, it’s natural to want to buy everything for it all at once. You want the environment to be perfect from the moment you arrive.
Unfortunately, that’s generally not realistic from a financial standpoint. Furniture, appliances, tools and décor can be very expensive, and going on a shopping spree could seriously deplete your cash reserve, which can be a big issue if an unforeseen house repair arises.
“As a new homeowner, you have no clue how much it actually costs to maintain a home, and you could be in for a rude awakening if your savings [account] is out of whack,” said Jeff Rose, CFP and founder of Good Financial Cents.
Plus, you never really know what you need in your new dwelling until you’re residing in it. That’s why financial educator Jonathan Thomas, MBA, advised, “Give yourself time to live in the home and develop a mood you want to create.”
That way, you don’t spend money on things you don’t need for your first house.
How To Get What You Actually Need
If you discover that you actually do need something — versus just wanting it — consider buying a gently-used item instead of a brand-new one. You could save a significant sum by doing so.
“For example, a new, high-quality sofa can cost upwards of $2,000, while a similar second-hand one might be found for under $500. You could even find someone giving it away for free!” said Rose.
You may even be able to furnish your entire home using Facebook Marketplace.
Anything Involving New Credit
Even if you dismiss the advice above, please heed this bit of wisdom: Don’t take on new debt before your closing day! Your mortgage may depend on it.
Eric Croak, CFP and president of Croak Capital, explained, “Buying expensive things on credit can change your debt-to-income ratio, which is how much debt you have each month compared to how much money you make. This ratio is a big deal when it comes to how much house you can afford — or if you can get a house loan at all.”
It would be a shame if your new car — or other large, financed purchase — prevented you from finalizing your mortgage. Even though it may be hard to do, it’s best to wait until after the home is officially yours before visiting the auto dealership.
Debt Reduction
Paying off debt isn’t purchasing anything tangible, but doing so is buying your financial freedom — or at least partial freedom. While it’s generally heeded as a sound money management practice, the timing may be problematic.
Croak said, “It might seem smart to pay off debt to boost your credit score, but that’s not always the right move. Sometimes, it’s better to use your money for a down payment, closing costs or just to save it.”
Buying and moving into a new home is a pricey undertaking. You’ll likely be glad you have some spare cash in the bank throughout this stage in your life.
Your Finances During the Homebuying Process
When a lender agrees to give you a mortgage, they do so based on the information you’ve provided. If any of those details change, you could delay or prevent closing on your home loan. Avoid these financial moves to ensure that doesn’t happen to you.
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