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Romance & Money

Buying Your First Home

Don’t forget the hard choices like life insurance

Wendy in Bakersfield, California:
"Our September wedding is planned and mostly paid. We are now planning the other details of our life together, and intend to have children right away.
We have a 20% down payment saved for a home purchase, and are also shopping for a new family car, and will need property and car insurance as well. It’s all so overwhelming.
We have been told we have excellent credit. I hope I’ve given you enough information for you to be able to give me your very best advice on these issues.
Thank you."


Wendy,
Clearly you two are organized and truly getting your ‘ducks in a row’ so to speak. Some people believe in destiny, I believe the choices we make deliver us to our destiny in better shape than the blind faith that no matter what we do our destiny will be achieved.

“Destiny is no matter of chance. It is a matter of choice. It is not a thing to be waited for; it is a thing to be achieved.”
William Jennings Bryan (1860 – 1925)

This is where the link between romance and money becomes critical. All the financial shopping and planning in the world will not hold your relationship together if the two of you do not agree on your goals. That being said, I’ll assume you are in harmony on these issues.

Regarding your questions, this is my best advice:
Since you are planning a family immediately, then the chances you will be moving within three-five years are strong. Find the house you want for now, and finance with a five-year mortgage. The rate is usually at least 1% lower than thirty-year mortgages and can save you thousands of dollars in interest. Be certain you understand what happens at the end of the five years; the most popular feature is a 5/1 arm. That means that the rate is fixed for the first five years and at the end of the five years it converts to a one-year adjustable rate. You do not want a five-year mortgage that has a balloon at the end. A balloon is a large sum of money due at the end of the five years.

After the first house (usually first time homeowners move within the first 2-4 years) look for a 20 or 30-year mortgage (or another five year) and make at least one extra payment a year. Make certain you write a separate check and clearly state “TO BE APPLIED TO PRINCIPLE ONLY” with your account number. This will take years off your mortgage and save you thousands in interest payments.

Regarding the car, I am no expert however I always buy my cars a year or two old (practically new) and save thousands off that new car sticker shock. There is a good book you may want to pick up, ‘What Car Dealers Don’t Want You to Know’, by Mark Eskeldson that should give you more insight on your car shopping questions.

Also, sell your old car yourself instead of trading it in. The average additional amount people generally net over what a dealer will give you for trade in value is $1000.00-$1500.00.

Insurance can be as confusing as mortgages to me. What I do know is without it you are doomed to financial stress should disaster hit your life. And sadly, disaster hits us all sooner or later.
For house and car insurance go for the higher deductibles and save hundreds every year. Don’t assume your homeowners insurance policy covers floods, earthquakes or tornado’s, especially if you live in and area that is prone to those natural disasters. Most won’t cover those issues and require you to have a separate policy.

Lastly and most importantly don’t overlook your life insurance. To be caught off guard by disaster is one thing, to be caught unprepared is another. Many young families whom hadn’t thought about life insurance yet were left not only in grief, but in financial disaster as well after 9/11. Be prepared. Buy life insurance to protect your loved ones should something happen to you. On the financial aspect of life insurance; it’s much cheaper the younger you are.

“Life insurance: cheaper the younger you are.
Time together; Priceless at any age.”
Unknown

Finally, don’t neglect to order your credit report once a year in order to protect your excellent credit. The insurance companies are also interested in your good credit as they have statistics showing that people with good credit file fewer insurance claims. Right or wrong, your good credit standing will keep your insurance premiums down.

Making good solid financial decisions that you both agree will deliver you to the life of your dreams is a wonderful foundation for your new life together, and will go far to eliminate the arguments that plague so many relationships.

Additional information on this topic:


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Important Financial Help Websites and Phone Numbers
mindy@overcoffeenotary.com

 

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