According to the National Association of Realtors® 2017 Home Buyer and Seller Generational Trends study, 36% of people buying a home are first-time home buyers. And of those age 36 and younger, 66% are purchasing a home for the first time.
Many first-time home buyers might not be aware of the challenges that come with buying a home. At Santa Fe Real Estate Property (https://santaferealestateproperty.com) we’ve put together a list of some of the top challenges for first-time home buyers. Knowing how to handle these challenges in advance can save a lot of frustration, time, and even money.
Home Buying Challenge: Not Understanding the Full Financial Impact of a New Home
Many first-time home buyers begin their search at the point they can afford a mortgage, forgetting to take into account the many other financial factors like property taxes, home owners insurance, higher utility bills, maintenance, and repair expenses. As such it’s important to think “long term” when it comes to buying a home. By planning in advance for the full financial impact, you’ll find it more rewarding when you step through the threshold of your new home.
Home Buying Challenge: Understanding the Mortgage
When it comes to a mortgage, many first-time home buyers may assume that you just fill out some paperwork, qualify, then move in! It would be nice if mortgages were so simplistic. However, there are many things that go into mortgages that are important for first-time home buyers to understand. For example:
- The type of loan. There are a many different types of home loans that you can apply for. Seek the advice of your lender or mortgage broker to determine the type that best fits your situation.
- Your credit score. Your credit score plays a vital role in what type of mortgage you can obtain. For example, to qualify for an FHA (Federal Housing Administration) loan with its lower down payment requirement, you need a minimum credit score of 580.
- Prequalify for a loan. By prequalifying for a mortgage, you know how much home you can afford before your home search even begins. This will help you forego “reaching” for a place beyond your means. It will also help you approach your home buying from a more “logical” standpoint versus an “emotional” one.
- Mortgage terms. Don’t be shy about jumping in and learning all the “mortgage” jargón. Find out what the differences is between interest rate, APR, and discount points. By becoming knowledgeable in these areas you’ll be able to ask better questions and make more astute decisions.
Home Buying Challenge: The Down Payment
The down-payment on a new home is usually the biggest initial expense. Make sure you do your homework with this one. For example, did you know that first-time home buyers who qualify for an FHA loan (see “Understanding the Mortgage” above) may have lower down-payment requirements? Veterans can sometimes get low or even zero down payment mortgages. And there are down payment incentives for buying homes in rural areas.
Take the time to focus on down payment options that will work best for you. For example, if your credit score is close to 580, but not quite there, you may want to take time to focus on raising it in order to qualify for the lower down-payment FHA loan.
Other Challenges and Considerations for First-Time Home Buyers:
- Don’t be afraid to ask for references from a potential real estate agent who will be representing you in your journey.
- Be sure to have an emergency fund that you regularly contribute to in order to help with any unexpected emergencies that may arise.
- When looking for a new home, you may have a checklist for the “perfect property.” It’s important to be flexible, as no home in your search will be “perfect.”
- Home inspections are vital to making sure you are getting what you are paying for. Be sure to talk to your real estate agent about having this done on the home of your choice.
- Make a list of the things “most important” to you when it comes to a new home and share this with your real estate agent to keep the search narrowed to your needs. For example, anything more than a few miles from downtown may be a “deal breaker” for you. Make sure your real estate agent knows this in advance to make sure you get relevant search results.
These challenges are why it is vital to have a good real estate agent working in partnership with you. An agent can help guide you through all the challenges and keep you focused on your goal of buying a home that best matches your needs. If you are home shopping in Santa Fe, then contact Darlene Streit at 505.920.8001.