Thanks to record low mortgage rates and home prices that have fallen roughly one-third on a national level from the real estate bubble’s peak, buying a home is now more affordable than it has been in decades.
(NOTE: This takes into consideration the price of the house/mortgage only, not other costs such as HOA fees, insurance, taxes, maintenance, etc.)
So, at a macro level, now is a great time for first-time homebuyers to consider purchasing a home. Obviously, individual factors will have to come into play – how long you think you’ll be living there, is your job stable, do you think prices will sink further while rates remain constant, etc. – but, in terms of affordability only, now is a great time to explore your options.
If you do decide that now is the right time to buy your first home, make sure you’re not going into the process blindly. Chances are this is the single largest purchase you’re going to make in your life, so make sure you’re treating it as such. Do your due diligence, talk to a bunch of different lenders and real estate agents, and see a lot of properties, among many other things.
Don’t end up making a purchase you later regret! Here’s a great article on 10 first time homebuyer mistakes that will hopefully help to ensure you make the best possible decision and don’t end up with home buyer’s remorse.
Here’s a Cliff’s Notes version of the first time homebuyer mistakes:
- Not knowing what you can afford
- Skipping mortgage qualification
- Failing to consider additional expenses
- Being too picky
- Lacking vision
- Being swept away
- Compromising on the important things
- Neglecting to inspect
- Not hiring your own agent or using the seller’s agent
- Not thinking about the future
Click here to read the article in its entirety. I definitely recommend you check it out!
From a financial standpoint, I believe the two most important items on this list are 1) not knowing what you can afford and 3) failing to consider additional expenses.
If you rely on someone else telling you what you can and cannot afford, you’re setting yourself up to get screwed. Keep in mind, many of these jobs tied to real estate are commission based. It’s in their best interest to stretch you into the highest priced property you can afford. I’m not saying every person tied to the real estate industry is shady or dishonest, but greed makes you do a lot of things you wouldn’t otherwise do.
Additionally, your mortgage person isn’t really going to know the ins and outs of your monthly finances. Come up with a figure you want to spend based on your knowledge of your own finances. If you know you want to spend no more than $1,500 per month on a mortgage stick to your guns, even when you’re told you can afford a $2,500 payment.
You also have to keep in mind that owning a home is not cheap. You’re responsible for all of the maintenance and upkeep; when something goes wrong, you can’t call your landlord and have him pay for the repairs.
Make sure that when you’re going through the home buying and mortgage qualification process you are able to set aside some money each month for maintenance and upkeep of your home. Chances are you’re not going to spend $200 per month, but by saving $200 per month, when you have to replace your roof in five years, you’ll already have most of the expense, if not all of it, covered without having to dip into your emergency fund or take out a loan.
What was your experience as a first time home buyer? Leave a comment below and, as always, please share this post using the social bookmarking buttons below and at the top of this article – especially Facebook and Twitter!