Most Common Budgeting Mistakes Homebuyers Make

Today we're gonna talk about the most common mistake home buyers make when they're budgeting for a new home. That's right, you're doing your budget, you're following your budget, you think you've got it nailed, and you might. But let's talk about the biggest mistake I see people make. Now, if you're new to this channel, I've been a mortgage lender for 20 years. My team is one of the top teams in America. We help people across America buy houses every single day. So if you need a lender you can trust who will ask the big questions so that your house ends up a benefit and not a burden, give us a call, 786-933-2077. Okay, let's get into it. Now, first of all, before you buy a house, you should 100% be doing a budget, 100%. Like, do not pass go. If you're like, well, I think I can afford about 4,000, my rent's 3,500, I could squeeze another 500 out, do a budget, do a budget, do a budget, do a budget. Because one of the things people do is when they actually do the budget, they start to recognize that all the money, oh, I think I have this, I could totally cut something. When they start looking at what they can actually cut, they're like, oh, shoot, I can only cut $100, I can't cut $500. So that's the first reason you want to do a budget. Now, the biggest mistake I see with budgeting is that when people look at what house they can afford, they go, okay, they do all their numbers, they look at what they can cut, and they come up with the number. I can afford $3,500, or I can afford, let's just say $5,000 a month is what I can afford for my principal, my interest, property taxes, insurance, if there's an HOA. $5,000 is what you can afford based on your budget. So then you talk to a lender like me, and you're like, hey, I can afford $5,000, can you show me the numbers, what gets me there? And so then we show you, if you buy this, if taxes and insurance are this, here you are at $5,000. And that's the house you buy. Here's where it becomes a problem. Property taxes and insurance go up. I cannot say that enough. I say it all the time, but I don't know if people think I'm joking, or if they're probably just not watching my channel, right? They're talking to someone else, they're not thinking about it, no one's saying, hey, you need a cushion, friend. If you say $5,000 is the max that I can afford every month, honestly, truly, you should be looking at a house where the payment's $4,042, because your property taxes and insurance will go up. Now, it depends on where you are in the country, how brutal it is. Where people usually have the most staggering responses is California. And I'm gonna tell you why. Let's say that you're moving from, I don't know, pick any other state. You're moving from Ohio to California, let's do Texas. You're moving from Texas to California. When you shopped in Texas, you would go off of what the owner's current taxes are, because Texas reassesses constantly. I mean, not every few months, but they reassess. So usually the taxes in Texas are fairly realistic to what you'll end up paying, unless it's new construction. California, no, no, no. Do not go off of the owner's current taxes. And I'm gonna tell you why. They bought that house in 2000, 2015. Their taxes are $3,000 a year. You're like, okay, taxes on this house are $3,000 a year. That's what mine will be. No, no, no, no, no, no. California is one of the states that reassesses property taxes after you close based on your purchase price. That's why people get supplemental bills in California all the time and freak out. So if you're working with a lender and you're saying, hey, look, my max is 5K, you guys are both going off of the taxes that are current, which is crazy. Any good lender that does California would never do that. But if you're working with a big call center that doesn't actually know each individual tax laws, you could end up in that position. You are going to be in for a shock, okay? And there's other states too. There's no state that just doesn't raise property taxes. None of them. And if you're like, oh, well, if the values go down, they drop them. Sure, if you fight them. Like, that's the thing. I have yet to see the government just give any of us money. Have you? Where's our tariff money, ladies and gentlemen? Where is it, right? None of it. The government never just gives us money. So to think that if property values went down, your property taxes would immediately go down. No, not without a fight. So I think it's important, first of all, to look at what your taxes likely will be after close. And you may go, well, isn't my lender going to do that? Look, we can somewhat estimate, but like, let's use Texas, for example. Texas is going to reassess, not immediately, and they don't do it off the purchase price. They do it off of what they perceive the value as. Me, as your lender, can I forecast what Texas is gonna think your house is worth in a year or two? Absolutely not. If it's based off purchase price, sure, I can look and go, okay, this is what you have for county, this is what you have for city, this is this, this is this. But I can't do that if it's not off the purchase price, if it's just off of what they're gonna come up with the value as. I think about Seattle a lot when I think about that because my sister constantly complains. My sister has a house in Seattle. She's a mortgage lender too. And I swear to God, guys, all she does every year is fight her tax bill because they keep on trying to increase her property taxes even though the values in her area have not gone up very much at all. But they're trying to increase it for these huge amounts. So she's having to fight it every year. As a mortgage lender, could she have guessed that they were going to try to do these huge increases that were just based off of air and whether you had the energy to fight it? No, no. So give yourself some cushion. And I would also suggest we live in a culture of today. Now, what's happening in this minute? I would say if you know there's certain expenses coming within the next five years, I would be considering that as well. Childcare in America is incredibly expensive. And if you're doing your budget for your house, you're pregnant right now, you're gonna be going back to work and you're not budgeting for childcare and you're going to need it, that could be a very brutal experience in the future for you. Like that can take you from affording the home to house poor. So I would recommend taking into consideration large costs that are coming up. So for example, when I've purchased homes before, I've taken into consideration how much I was gonna be paying for my son's college. That's not something that lenders look at, but it is something you should be thinking about in your budget, okay? Homeowner's insurance. A homeowner's insurance is one of those things that people are constantly shocked by, myself included, okay? So the first thing you need to know is that when you're getting pre-approved with a lender, when we give you an estimated payment, we have no idea on insurance. Like my team will tell you that. We're like, yeah, we don't know. Like we're guessing. And the reason is you can't know what the homeowner's insurance is going to be on a house until you have the house. I don't know what provider you're gonna pick. Some of them are gonna rip you off, some aren't. I don't know what your deductible is gonna be. I don't know the age of the roof. I don't know if you're picking a house that's in a ditch. I don't have that information. Even if I had all that information as your mortgage lender, I don't do insurance. I can't quote you on it. So I think that's something important that people don't recognize. They may be looking at the sites like Zillow, Redfin, any of them that give you a payment and they're like, well, it says homeowner's insurance should be about, do not trust it. Do not trust it. You know, one of my favorite games when I was buying recently in Florida was laughing, laughing at the homeowner's insurance quotes that it was saying the property was going to be. I knew there was zero chance on any of the properties. And I would call my insurance guy and be like, hey, like, what do you think this is gonna be? Zillow would have it at $300 a month. He'd be telling me it's $1,000 a month. Yeah, and look, I'd always check, you know, check with another broker, et cetera. But what you need to know is the only true accurate insurance quote is from a real homeowner's insurance agent. And it's specific to the property you're buying because roof age, water heater age, if there's prior claims and the location of the property, as well as the build type, the type of roof, all comes into play. Now, let's say you're like, okay, Jen, I did my budget. I thought about if there's any big tickets coming up that I need to keep in mind. I understand property taxes are gonna go up. I researched my county and city. Do it. Go to the property tax websites, guys. Become property tax pros. And I'm telling you this because if you ever wanna argue what your property taxes are, you need to know how these websites work. You know, there's some parts of the country where the city has a tax, the county has a tax, the town has a tax, the dog down the street has a tax, the state has a tax. Like schools, fire, police, you know, sales, like there is so much stuff that can go into tax bills. Learn it. Learn it for the area you're looking in. This is your responsibility, okay? Because sometimes I'll hear, that's the one, it's not my job. No, it's not my job to own your tax bill. That is your job, it is your tax bill, okay? Insurance, let's say you get the insurance quote, you're like, I've got my insurance quote, good. Do I still think you need a cushion? Yeah, yeah. There's this misconception that once an insurance company says, hey, yeah, your insurance is gonna be $800 a year, that they actually have to honor it. Not really. So what we'll see sometimes, and thank God, not often, is we'll get a call from someone, they're like, I don't know what to do. My insurance company just said they sent a drone over my house, they did an inspection, and now my insurance is $4,000 a year. My response to that is always shop them immediately. You need to make sure you always have active insurance on your house, but unfortunately, it feels like, feels, don't have proof, these are my feelings, it feels like sometimes the companies that quote the lowest somehow have an excuse to charge more down the line. And then it's always a game of, okay, how much does it go up yearly? Because so many people have taxes and insurance as part of their mortgage, they're not really paying attention to if the insurance is increased until they get that bill from the mortgage company that says, hey, you don't have enough in your escrow account, we need more money, and then everyone goes to the mortgage, what did you do to me mortgage, you ruined my payment. Thankfully, you guys don't do that to me because you watch my videos, but I know other lenders suffer from this. Guys, we don't control your taxes and insurance, and look, do insurance companies increase insurance yearly? Yeah, it's pretty rare I see it go down. The only place we saw any decrease was Florida after some of the stuff that DeSantis did, but that was it, that was it. And look, do I think you should shop your insurance every single year? Yes, however, however, if you're in an area that's super high fire, super high fire, super high flood, and you have a good policy, as long as it's not going up crazily, I would probably recommend staying with that carrier. I'll be honest, that's what I do. So where I'm sitting right now, I'd actually gotten a notification from Chubb that they were canceling my insurance. This house is high fire risk, California, everything that insurers hate. And we started getting quotes from everyone else. Thankfully, my agent was able to work with Chubb, they have another division called Chubb Solutions, and they were able to keep the policy. And I'll be honest, guys, they were still cheaper than everyone else. So shopping is important, but at the same point, if you have a good policy, even if they're trying to cancel you, try to fight to keep it, because you'd be surprised. I was surprised that we were able to just move to a different division. And yes, the premium went up, but it wasn't as scary as I was seeing from other providers. So there is some benefit to loyalty, okay? So you're gonna budget for your property taxes and insurance to go up, because it's inevitable. If you have a 30-year fixed mortgage, do you need a budget for your mortgage rate to go up? No, the only way your mortgage is gonna go up, your mortgage rate, your principal and interest, if you have a 30-year fixed mortgage, is if you refinance into a higher rate, which doesn't make sense to me, or if you don't make your payment. If you're not making your payment, that changes the terms of your note, and then you can be in a position where you're paying penalties, et cetera, et cetera. So make your payment. That 30-year fixed mortgage principal and interest isn't gonna change. Now, the other thing to consider is HOAs, homeowner association dues. Many times people go and they live and they pick a condo because they're like, oh, it's so much more affordable. Yeah, I don't like HOAs, guys, I'm not gonna lie. If it's on a house, I'm less worried, most of the time. If it's for a common ground, it's 20 bucks every quarter, okay, I don't care as long as their rules aren't crazy, personally, okay? Condos are different. That's why there's so many lawsuits right now. Literally look up lawsuit against condo board. Residents suing HOA. You can have it where right now you buy the house, the HOAs are $200, it fits within your budget. Next year, it's $700. And you're like, wait, what? It can go up, yeah, it can totally go up that much. It can totally go up that much, guys. You could go from $200 to $2,000. It's whatever the building needs. And sometimes when you see these super low HOAs, it's because they have a truckload of deferred maintenance and with all the regulations that are happening right now, those bills are come and due. So if you're gonna buy a condo, and right now the HOAs fit within your budget, you need a cushion. I cannot stress it enough. You need a cushion. Okay, let's also talk about budgeting like money in your account. If you have a bunch of credit card debt in your budget, you need to have paying off that debt. Because what you don't wanna do is get into a house where you're making your house payment, your credit cards are still full, you can't pay them down because you budgeted the house to take all the extra money. If you have credit card debt, part of your budget needs to be paying down those cards even if it affects the house budget because paying 20 to 30% interest for the rest of your life is the path to poverty. Simple, okay? So look, the biggest mistake is people go to their max. They're not thinking about long-term expenses. They're not recognizing that taxes, insurance and HOA can go up. They're not budgeting to pay off those credit cards. And look, you also need to have in your budget saving some money. I know it's hard to save right now, but even if you get all the home inspections, something will go wrong with the house. It's inevitable. Whether it's six months from now or two years later, something's gonna break. A hot water heater, a pool pump, whatever it is, you could have issues. So look, I hope this video was helpful. Questions, comments, wanna work with myself and my team? My team is awesome, guys. Check out our reviews. What you'll see is people don't talk about me as much. They talk about the team. Why? The team's awesome. I only work with people who are better than me. So hit us up, 786-933-2077. Thank you for watching.