Owning a home is at the heart of the American dream. Newly married couples often start out renting, but their goal is to get into their own home as soon as possible. Owning a home brings a lot of joy. However, there are a lot of challenges that first time home buyers face.
Challenge #1: Affording the Payments
Many first time home buyers feel that they are ready to purchase a home if they can afford the mortgage. However, just because they can afford the mortgage does not really mean that they can afford all of the payments associated with owning the home. Some of these payments include things like property insurance, taxes, utility bills, homeowners association fees, and maintenance. For first-time home buyers, these fees can be overwhelming.
Challenge #2: Putting the Cart before the Horse
First time home buyers mistakenly believe that buying a home starts with searching for a home. The truth is that buying a home begins with being prequalified for a loan. Many first time home buyers will go house shopping, set an imaginary price range in their mind, and then try to get the loan. However, this way of thinking is backward. Getting approved for a loan lets a first time home buyer make a sound financial decision as opposed to one based on emotion.
Challenge#3: Going at It Alone
Some first time home buyers are on such a tight budget that they look to cut out expenses wherever they can. They do this by eliminating a real estate agent and a lawyer from the scenario. Instead, they rely on the listing agent to help them. What they do not realize is that the listing agent has the best interests of their client at heart, not the home buyer. Buying a home is the single largest investment a person will make. It is not something to go at alone.
Challenge #4: Using All Their Savings for the Down Payment
First time home buyers are enticed by the idea of being able to avoid mortgage insurance if they put 20 percent down on their home. Truthfully, this represents a drastic reduction in their monthly payment. However, if a first time home buyer uses all their savings to put the 20 percent down, they are putting themselves in a precarious situation. New homeowners need to have savings to cover a rainy day situation.
Challenge #5: Choosing the Right Mortgage
The most popular type of home loan is a 30 year mortgage. But that is not the only option available for new homeowners. In some instances, homeowners who can put a considerable amount down as a down payment may opt for a 15 year mortgage. The right type of mortgage for a homeowner depends on their future goals and long-term plans.
Buying a new home is an exciting experience. When it’s done correctly, it can be a financially and emotionally rewarding decision. New homeowners should do their research and speak to professionals in order to avoid common first time home buyer pitfalls.