Buying a home is the biggest single purchase that most first-time home buyers will ever make
The vast majority of those first-time home buyers need to get a home loan to do it. Here are 5 things that first-time home buyers need to consider first…
The last few years has seen some potential first-time home buyers shy away from buying their first home due to concerns over stagnant wages, rising debt, and hesitancy to make a commitment. Well, things sure changed fast. Some reports show that a whopping 1 in 5 consumers is actively looking to buy their first home, and approximately 46% of millennials (ages 18-33) will start looking in the next year or two.
If you’re an aspiring first-time home buyer, it can be overwhelming and intimidating to think of committing to a mortgage. I hear ya, it’s a big deal and shouldn’t be taken lightly. (But at the same time, try to refrain from over analyzing and overthinking. Ever heard of “paralysis by over-analysis?” Yeah, not good.) Let’s be real here; buying a home is the biggest single purchase that most people make, and the vast majority of them need to get a home loan to do it. Here are 5 things that first-time home buyers need to consider first:
Save for the down payment
Most mortgage lenders require a cash down payment of 5-10%, or even up to 20% of the purchase price. But if you’re anything like the average Joe, you may find it tough to save a for a huge down payment. Most first-time home buyers these days don’t have an extra $20,000-$50,000 burning a hole through their back pocket! Especially those “younger adults” who just accumulated a hefty pile of student loan debt, and now after graduating can’t even find a decent paying job in their field. (Don’t even get me started on the broken higher education system in this country). Anyways… Then the buyers who weren’t able to save up a 20% down payment had to fork out an extra $100-$200 a month on top of the mortgage itself to pay for “private mortgage insurance” (PMI). I’m going to go out on a limb here and guess that an extra $100-$200 expense each month can be a BIG deal.
Now here’s the good news… Well really it’s awesome news! Today many lenders nationwide offer loans with a much more affordable 3.5% down and down payment assistance programs. In fact, in Utah many of my clients right now are qualifying for ZERO DOWN mortgages with NO MORTGAGE INSURANCE! That’s right, as of the time I’m writing this, many of my buyers are able to get 100% financing to buy their first home, some even without PMI! That’s more money in their pocket. Check with your lender in your state to see what options you have where you live. 100% financing is back in a big way and in some cases, you can qualify for 100% financing with a credit score as low as 580. If you’re in Utah and want to find out if you qualify for one of these amazing zero down mortgages, you can speak to our Preferred lender. There are some great mortgage options for first-time home buyers right now.
Consider ALL the expenses when budgeting for a house:
Now it’s time for some honesty. I don’t mean to rain on your parade here, but I would be doing you a disservice to not mention that your monthly mortgage payment is just the beginning. It’s easy for first-time home buyers to overlook this stuff. We don’t want you getting in over your head and not being able to afford your first house. Being “house poor” could turn your dream home into a nightmare. When sitting down to crunch #’s and budget for buying a house, loan principal, interest, taxes and insurance (usually all included in your mortgage payment) are really just a few of the expenses you’ll have. How about your monthly utilities? Also consider any additional cost of commuting further to work. When doing your research, it’s smart to call the utility companies and ask them to estimate what the costs will be. Also ask whether they have any “equal pay” plans available, which would let you pay the exact same payment each month without the wild ups and downs as the weather changes. If you are moving further away from work and family, how much extra will you need to spend on fuel? How about extra time needed to commute? Money isn’t the only thing you should budget. Time is even more valuable; you’ll never get it back.
If you have never lived on your own before, or for those who previously rented, the added costs of owning and maintaining a home can be a shock. Do you need a lawnmower and/or snowblower? Does the home have any monthly or quarterly HOA dues? Think about TV, internet, and any home security system you’ll want. Budget all of these expenses honestly and see if you can still afford the house.
Don’t get a mortgage from just any lender
Finding a proven, professional, and top producing lender should be the very first step a buyer takes in the home-buying process—even before finding a Realtor. We recommend getting a referral from those close to you, or from other real estate professionals who you know and respect. If you already have a great lender, ask them for referrals for the best Realtors they work with. To have the best mortgage experience possible, buyers really need to have open and ongoing communication with their lender. Since saving for a down payment is a potential barrier to homeownership for many first-time buyers, it’s crucial to find a lender that helps educate First-time home buyers on what they can afford, and compare what financing options are available. Mortgages are not one size fits all so to find the loan options that are best for their needs, buyers should openly and honestly talk about their financial situation with their lender.
Perhaps the single most important aspect of buying a home is to fully understand what to expect throughout the buying process. Do some research. Assuming you have chosen a Realtor wisely, they should be educating you on how the process works and what to expect. The best Realtors will have the heart of a teacher and will be there to educate and hold your hand if necessary. While buying a home may feel overwhelming and confusing for first-time buyers, finding a lender and a Realtor that you can trust is key. They’ll guide you in the right direction and help you prepare yourself for the journey.
And finally… Have fun!
This should be a fun experience for you and your family. If you prepare yourself for buying a home and surround yourself with an all-star lender and Realtor, then you’ll be setting yourself up for a low stress process. Well, as little stress as possible anyways. There will always be some stress, but that’s all part of the journey and what will make it that much sweeter when you’re finally handed the keys to your new home. Happy House Hunting!
More Resources for First-time Home Buyers:
- First Time Home Buyer Tips: How to Buy Your First House by Andrew Fortune
- How To Start the Home Buying Process for the First Time by Kyle Hiscock
- How to Buy a Home in a Seller’s Market by Lynn Pineda
- 5 Killer Multiple Offer Strategies for Home Buyers by Justin Culley
- How to Buy and Sell a Home At the Same Time
- A Home Buyer’s Guide to Saving for a Down Payment
- 15 Reasons Why You Should Be Moving to Salt Lake City
- 10 FHA Guidelines EVERY Home Buyer Should Know by Madison Mortgage Guys
About the Author: The above article on 5 Things First-Time Home Buyers Should Do First was written and provided by Dustin Brohm, a leader in the field of Real Estate sales, marketing, and smart home technology. Dustin can be reached via email at [email protected] or by phone at 801-455-8753. Dustin has helped many people buy and sell Salt Lake City area homes for years.
Thinking of selling your home? I have a real passion for buying and selling Real Estate, as well as marketing & smart home technology. I’d love to share my expertise!
I help people buy and sell real estate in the following Salt Lake area cities & neighborhoods: Holladay, Cottonwood Heights, Millcreek, Olympus Cove, Canyon Rim, Sugarhouse, Midvale, Murray, East Millcreek, Sandy, White City, Draper, Riverton, Daybreak, South Jordan, West Jordan, Herriman, Bluffdale, South Salt Lake, The Avenues, Federal Heights, and of course, Salt Lake City.
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