First Time Homebuyers

So you are thinking of buying your first home. Let us say that there is nothing like owning your own home. You can, for the most part, do what you want with it. Feel like painting the bedroom green;do it. Want to rip up that old carpeting and put down a wood floor; do it. It is a wonderful feeling being able to express yourself. Let's just make sure you are ready for the added responsibility that comes with home ownership. Our goal is to give you, the first time homebuyer, enough good information so you can make a well-informed decision on whether or not you are really ready to buy a house.

In this section we will cover those issues that are pretty much strictly first time homebuyer issues. Then we will point you to other sections to help you gain additional insights into the home buying process. Keep in mind we are in no way attempting to discourage you from buying a home. On the contrary, we would like everyone to be able to own their own place and build financial and emotional equity in their lives. But we also know that not everyone may be ready to purchase a home, or once they know what's involved, may want to.

Renting vs. Buying: The Pros & Cons

Obviously, there are good points and bad points to both renting a place and owning a home. Only you know which works better for you. There is a wonderful HUD site that breaks down the differences in hopes of helping you better understand them. Take a moment to visit in hopes of making your decisions easier.

Rent vs. Buying

We think that the biggest items overlooked by renters when they are thinking of buying a home are the increases in utilities, insurance and taxes. Most people understand that when you own a home, the owner is responsible for the upkeep. But many are unaware of the increase in utilities that come with a home, especially when coming from an apartment. And in some cases renters have not had to pay for water, something else to keep in mind.

If you don't already have renters insurance and your insurance company will sell you a homeowner policy, finding the right insurance can be costly. You should call several companies and get rough quotes before you start your house hunting. And if you have never purchased a home before, here is one we bet you never heard of, mortgage insurance. Also called MI or PMI for short. This is an insurance premium YOU will have to pay if your down payment is less than 20%. This will increase your monthly payment anywhere from a few dollars on up. Mortgage insurance is a policy that helps reduce the risk to the lender if you should default on your loan. Depending on how much you put down the cost can be reduced. Your lender will be able to give you more details on it.

Taxes are another item renters are usually not accustomed to paying. Now, most of the time your property taxes will be escrowed. In other words, part of your monthly mortgage payment will include money for your taxes that is set aside until they are due by the mortgage holder. You are still paying for them. Let's say your monthly mortgage amount is $850 P & I (principal and interest) and your taxes are $1,800 a year. Your monthly payment to the mortgage holder will be $1,000. ($850 plus $1,800 divided by 12 or $150 per month.) This can change as your taxes change.

HINT: Just because the lender says your monthly mortgage payment is going to be $XX amount, keep in mind that it probably does not include your property taxes. Always ask if the monthly amount quoted is for P&I only. This will tell you if you should expect to be paying more each month.

Keeping Up With The Joneses

Another area first time home buyers can get into trouble with is buying into a home that is too much for them. And when we say too much we are not talking about size. We are talking about cost. Let's face it, depending on the area, even a small house can cost a fortune. Stay within your financial means. Don't get swept away only to find you have to eat oatmeal for dinner every night. Take your time looking and look within your budget. This will help to reduce the urge to buy into more than you can afford. Keep in mind that just because you get approved for $XX amount does not mean you can really afford to pay the monthly mortgage and still live the way you want.

Don't be afraid to sit back once you have had a chance to get a handle on the real monthly cost of buying a home and say, “Maybe now is not the time.” Maybe saving a little more would be a better bet. Remember, only you can make such decisions. We just want to make sure you have all the information to help you.

Now don't get discouraged, all these items affect those who have already purchased homes and are looking to move into a new home. But as a first time homebuyer, we wanted to make sure you were aware of such things so you are not taken off guard if such things happen.

Are You Really Ready To Buy A New Home?

Most people consider a financial review the first step toward buying a new home. We agree a good understanding of your finances is a must, but we believe the first step is taking a look inward. Are you emotionally ready for such a change in your life? Yes, we said emotionally ready. There are many more issues involved in buying a home and we believe that being emotionally ready is just as important. Maybe even more so. After all, you don't want to get into a home and find that it makes you so emotionally drained that you never enjoy living in it.

The Big Picture

Take a look at your life from the Big Picture viewpoint. Examine such things as where you want to be in two, three or five years. Maybe you want to change jobs, move to another town or start a new business soon. Maybe you are getting married in a year or two, consolidating two homes, or foresee a lifestyle change. These are just some of the things you should be considering. Depending on your answers, maybe now is not the best time to buy a new home, but then maybe it is. No one knows the true answer but you. We do not want to discourage you from buying a home; far from it. We think everyone who is ready should own his or her own place. We just want to get you thinking outside the box and make sure you understand what you are about to undertake. Once you have taken a look at the Big Picture, there is another emotional item to consider.

Although most of us have found it to be minimal, buying a new home can be a very stressful time on one's life; much of which depends on how much you understand the process before you begin. The more you know about the terminology and what is expected, the less you will feel out of control and have less stress to deal with. There are significant differences in the process when buying an existing home or building one. We will cover these in detail later on. But for now we want you to be thinking about how you deal with stress and your understanding of the entire home buying process.

Keep in mind that dealing with all the various people can also make things confusing which could add to one's stress level. You have Real Estate Agents, Buyers' Agents, Lawyers, Builders, Inspectors, Insurance agents, Sub-contractors and so on. Then there are all the forms, appraisals, good faith estimates, surveys, tax returns, affidavits, etc. The more you know, the better you will understand the purpose of these and keep the stress level down.

Before You Go House Hunting

We know that you are anxious to get out there and start looking but there are two things you should understand before you go that will help save you time, money and aggravation once you get out there.

The first is having a solid understanding of your finances. There is more to this than just knowing what your income is. Take a few moments and review what you really need to understand about your finances before you go house hunting.

The second is knowing what you really need and want in a home. Too many people just go out there with no idea and soon find themselves in a home that falls short of their expectations. Having it in writing will help you remain focused on what kind of home you want.

We also suggest checking into getting pre-qualified for a mortgage to help you gain a better understanding of what lenders may be willing to loan based on your finances and credit history.

Where's A Good Place To Live?

Many times you already know what part of town or area you want to move to. Then there are times when you are moving to a place that is not very familiar to you. Sometimes, even those areas that you think you know well may not be exactly the place you would like to live in. We have put together some things to think about to help you make a good decision about where you want to live. Remember, buying a house is not like living in an apartment. If you don't like the area you moved to, it's not very easy to move out when you have to sell your home first. Doing some research before you start driving around can help you save a ton of time.

Ask yourself the following few questions:

Do you like city, suburbs, or rural life?
Do you want nearby shopping/entertainment?
What kind of commute time is good for you?
Are quality schools important?
What about the local crime rates?
What's the tax rate for the area?
Is area growth good or bad?

These are a few things you should research when deciding what neighborhood(s) might be good for you. Depending on how important things like shopping, commuting and taxes are, you might find that what you thought was a great location does not really fit your needs.

Future growth is always one that gets overlooked. You might find yourself living along a street that is scheduled for widening and hate your new home. A new mall might pop up just a few blocks away and create noise and traffic issues you were not counting on. Check with the local zoning board for any future projects scheduled in the area.

Finally, stop into the Town or City Hall and see if they can give you some help. Keep in mind that most people are kind and want to talk to you. Just respect that you probably caught them at work and they do have other things that need to be done.