A Guide For First-Time Homebuyers
By Blake Johnson
Homeownership has been viewed as a rite of passage for generations. Go to college, start your career, buy a house, get married and have 2.5 kids, because that’s what society tells us ‘adulting’ looks like. It’s assumed everyone is striving after that one idyllic view of the “American Dream,” but is it right for you? Is it what YOU really want?
There are many factors involved with deciding “Is homeownership right for me?” What are the benefits/drawbacks to homeownership? Can I still buy a home with my student loan debt? Am I ready to settle down? Isn’t it cheaper for me to keep renting? These are some of the questions today’s potential first-time homebuyers are asking themselves. The whole process of buying a home can seem daunting. With all the information out there it’s hard to distinguish what is reliable and what is undependable internet fodder. So, let’s jump in and un-muddy the waters the best we can.
What are the benefits/drawback to homeownership?
-Smart investment. Home prices consistently increase over time  so you can build wealth for yourself, not a landlord.
-More personal space. Spread out. Have an office, craft room, or grow your own garden in the backyard.
-Privacy. Swap the paper-thin wall between you and your noisy neighbor with some bricks and landscaping. No longer will you have to listen to that annoying herd of elephants living above you. (Unless your kids’ rooms are upstairs.)
-Pride. Boost your self-esteem with the pride that comes with homeownership.
-Projects/Repairs/Maintenance. Some may see it as a negative, but I personally enjoy the responsibility of maintaining and improving my home. It’s hard to beat the sense of accomplishment that accompanies fixing that leaky faucet, or renovating your front entry to make it more inviting.
-Community. Owning a home allows you invest in the same community for years to come.
-Down payment and closing costs. It can take some planning and time to come up with the funds required just to move in.
-Loss of mobility. Get a new job in another city/state? It’s going to be more difficult to sell a house than it would be to move from a rental house or apartment.
-Projects/Repairs/Maintenance. Although I enjoy doing the work on my home, I would prefer to not have to pay for all of it. Unexpected projects are the most annoying. Mowing, don’t forget you have to cut the grass!
-Foreclosure. If you get behind on the mortgage payments, the mortgage lender can take your house.
The quick answer, it depends on your situation. There are many factors that go into a lender’s decision to approve you for a loan or not. Five of the common factors are: your credit score, your existing debt, your employment history, the size of the loan you want and finally, the amount of your down payment.
The best way to find out if your debt will prohibit you from obtaining a loan is to contact a mortgage lender early on in the process. You can find a list of knowledgeable and friendly lenders HERE. The lender will collect information from you to determine if you are currently in a good financial position to buy a home.
If you aren’t there yet they will work with you and develop an action plan to help you get out of debt and save up the down payment and closing costs. Most lenders are very helpful with putting you in a good position to purchase a home. The better prepared you are prior to getting a mortgage, the less risk you represent to their money. They want to give you the money. A mortgage lender wouldn’t be in business long if they didn’t give people money to buy houses. They want to give you great service as they help you prepare for homeownership, so when the time comes for you to choose the lender for your mortgage, you go straight to them. They can be a valuable resource, find one that you like and use their knowledge!
Am I ready to settle down?
Once again there isn’t a straightforward answer for this question. Ultimately only you can decide if owning a home is something you’re ready for but a few question to ask yourself are: Do I have a stable job that doesn’t require moving frequently? Does my current job(s) give me the financial resources to pay the mortgage as well as my other bills/debts? Do I plan to live in the same area for a while? Am I ready for the responsibility that comes with homeownership? What are the responsibilities that come with homeownership? (hint: ask someone that owns a home.) Below are some stats about recent home buyers and sellers that could help:
Who’s Really Buying Homes?
According to the National Association of REALTORS® 2017 Home Buyer and Seller Generational Trends :
– The Millennial Generation, 36 years old and younger, made up the largest generation of homebuyers in 2016 at 34%
– Generation X, 37-51 years old, was the second highest at 28%
– The median household income for the Millennial home buyer was $82,000
– Generation X had a median household income of $106,600.
– While 66% of all home buyers were married couples, 17% were single women, 7% were single men and 8% were unmarried couples
According to the National Association of REALTORS® 2016 Profile of Home Buyers and Sellers :
– Sellers typically lived in their home 10 years prior to selling, an increase from 9 years in the previous year’s report.
– For 44% of recent buyers, the first step that they took in the home buying process was to look online at properties for sale, while 17% of buyers first contacted a real estate agent.
– Nearly seven in 10 buyers interviewed only one real estate agent during their home search
– 88% of buyers would use their agent again or recommend their agent to others
The upfront cost of homeownership is certainly higher than that of renting, but long-term the financial benefits of homeownership are much greater. Think of homeownership as an investment in your future. Saving up the down payment and closing costs can be challenging and take quite a bit of determination and discipline, but the benefits are great! A Harvard University Study  found that the average gain in home prices from 1975 to 2012 as measured by a common home price index, that owner would have seen a real, inflation-adjusted gain of 26% over 30 years. There aren’t many other investments you can make that will give you a 26% return. The amount of return on the investment of homeownership depends on how the market is performing in your area as well as how the national economy is performing.
Depending on the size of house you buy, your mortgage payment could be less than the monthly payment at an apartment or rental home, mine is! The city and state you live in could also potentially give you substantial tax breaks for owning a home. You also must factor in maintenance and repair costs of homeownership, which could also put stress on your monthly budget. Short-term, homeownership can be more expensive than renting, depending on what you buy, but in my opinion the long-term investment of homeownership is a solid win, and Harvard University  agrees with me!
There are a lot of things to consider when deciding if homeownership is right for you. The few questions addressed above are a good starting point of things to look for and think about. The process of buying a home can be intimidating and confusing because of all the unfamiliar steps and terminologies. If you have any question please email or call any of us at FireBoss Realty. Finally, do you currently own a home? How did you know you were ready to jump into homeownership? Leave your comments below, we would love to hear your input!
 National Association of REALTORS® 2017 Home Buyer and Seller Generational Trends
 National Association of REALTORS® 2016 Profile of Home Buyers and Sellers
 Is Homeownership Still an Effective Means of Building Wealth for Low-income and Minority Households? (Was it Ever?)