Setting out to buy your first home can be really exciting. However, the process can be equally confusing to those who have little to no experience. Where do you even start? What type of home should you start out with? Perhaps even more importantly, what should you be planning to do once the dust from the house warming party settles?
The Need to Buy a Home
There is plenty of information that documents the benefits of homeownership. Beyond the perks for individuals and families, it is really a basic necessity.
Joe Tafolla of RealEstateWA.org sums it up perfectly: “you’ll always be paying someone’s mortgage, you just get to choose whether it is your own, or for someone else.” If you rent for long enough, you’ll pay off several houses for real estate investors, and continue to support their early retirement.
If that isn’t motivation enough, understand that lifelong renting really isn’t sustainable. Most people need to rent for a little while. but in reality the vast majority of people simply can’t afford to rent forever. Sooner or later they’ll have to stop working, and very few retire with enough money to pay rent for several decades (unless they own investment properties).
Buying a home is really a basic need. It acts as a fundamental and foundational building block for the rest of your life, and finances. It’s what families, and finances are built on. Once you nail this down, you can keep moving toward your other goals. If you don’t, your life remains up in the air. Even for those that crave extended travel, owning some land or a small condo as a home base to retreat to is a smart move. It gives you an anchor.
So Where Do You Start?
Buying a home is both a lot easier than many think, and much more complex. The more you can learn about the process in advance, the better. Understanding the steps can remove a lot of stress and anxiety, and helps first time home buyers get better deals. This doesn’t have to be time consuming, but get to know the steps, and talk to a real estate professional or two. Know what to expect going forward.
Get Qualified and On the Right Track
One of the most critical steps in the home buying process is getting pre-qualified for financing. This comes before browsing houses for sale online, or visiting open houses. Don’t get caught dreaming until you know what type of financing you can get.
Talk to a professional mortgage adviser and find out how much house you qualify for and at what payments, and down payment requirements, if any. More people will qualify for more than they think – thanks to low interest rates. Don’t be afraid of the unknown. It’s far better to discover any credit, income, or paperwork challenges well in advance. You can make a plan to overcome them when you are informed. It might take you 30 days or 365 days to get in shape to buy the home you want, but you’ll never know, or get closer until you find out. Each day you drag your feet, the house you want will get more expensive and further out of reach.
Finding the Money You Need
If you have more than enough cash for the home you want, that’s great. However, you may still want to consider some level of financing for tax, liability, and leverage reasons. While there are many great home loan programs out there, including 100% mortgage loans, most will find they probably need some money for deposits and closing costs. So where do you find this money? Family and friends are a great place to start, but there are also down payment grants and local housing assistance programs that can help cover closing costs and even making improvements to a home. If borrowing or grants aren’t an option, look for ways to cut your bills and monthly payments temporarily so that you can save the difference.
Tips for Finding the Right House
Perhaps the most important thing for most first-time homebuyers to wrap their heads around is that it is very unlikely they’ll stay in their first home very long. Many think the first home should be their dream home. More likely, they will upgrade in a few years. This is why they have starter homes. Regardless of how much of a mortgage you qualify for, or how much you think you can stretch to make payments, try to stay well within your means. Pick a home or condo that you can easily afford. Use your surplus funds and growing home equity to move up to your dream house. Don’t just plan to buy your ideal dream home, start planning how you can invest in more real estate to boost your finances and lifestyle beyond the four walls you live in.