Buying a house for the first time can be extremely exciting. This is your opportunity to choose and customize your living space. It’s your chance to finally get a stake in the real estate market. And it’s a way of both showcasing and building on your financial success.
Unfortunately, buying a house for the first time can also be nerve wracking. If you don’t know what you’re doing, if you’re concerned about the financial risk, or if you’re just confused about something specific in the homebuying process, you may be intimidated to take the next step.
Fortunately, most of these concerns are easy to address and demystify. Trust us: the home buying process isn’t nearly as complicated as most people make it out to be.
The Top Concerns of First-Time Homebuyers
These are some of the top concerns we hear from first-time buyers:
- Renting vs. buying. Renting and buying are dramatically different in the real estate world, and your choice can have long-term consequences for your financial future. Buying a house gives you real equity, allowing you to capitalize on rising home prices; it can also be cheaper on a monthly basis, depending on the area you live in and other factors. On the other hand, renting means you won’t have financial responsibility for the property and you’ll be able to call a landlord anytime anything goes wrong. It’s not always clear whether renting or buying is better, but buying has so many advantages that it’s at least worth considering. If you’re on the fence, go with your gut; would you rather have the ownership and equity of buying or the comfort and stability of renting?
- The timing. Hypothetically, it’s possible to time the real estate market, buying when houses are at their cheapest and selling when they’re at their most expensive to make a profit. But in practice, this is almost impossible. Market dynamics are incredibly hard to predict and markets can be fickle. It’s important to look at historical real estate prices and consider possible futures for an area, but don’t worry too much about mistiming the market. If you’re going to hold this house for many years, precise timing isn’t going to make that much of a difference.
- The search. How do you even search for a house? Many first time buyers don’t know where to begin, aimlessly meandering through online listings until they have a better idea of what they want. You can greatly expedite and streamline this process by working with a buyer’s real estate agent, who can help you find better deals that better fit your needs.
- The offer. When it comes time to make an offer on a house you truly love, how does it work? Depending on the market, you may want to offer the asking price, above the asking price, or below the asking price. You may also have certain conditions and contingencies in place; for example, it’s almost always a good idea to have a home inspection contingency so you can withdraw your offer if significant issues are found in the home. Working with a real estate agent can help you put together the right strategy for this particular offer. Prospective home buyers should also consider the guidance of mortgage lenders to determine how much they can afford based on their desired monthly payment and the average home price in the housing market. Balancing these factors during the home search process is crucial to securing a suitable home loan that aligns with your financial goals.
- How mortgages work. Mortgage rates can seem confusing and complicated to outsiders, but they’re realistically very simple. A mortgage is a consumer loan for a home. You provide a down payment for a portion of the purchase price, while the bank loans you the rest at a specific interest rate. Each month, you’ll make a mortgage payment to the lender or the bank, which covers the principal of the loan, interest rates associated with the loan, and in most cases, fees that go into an escrow account to cover home insurance and property taxes. You may also be responsible for paying PMI. Over the course of your loan, usually 15 or 30 years, you’ll pay down the principal and eventually own the house outright.
- The down payment. If a down payment is a portion of the purchase price, how much should you offer? Most banks require between 3 and 5 percent for a down payment, but you’ll need at least 20 percent to avoid PMI. Smaller down payments give you more financial leverage and capital flexibility, while bigger down payments give you smaller monthly mortgage payments and more equity. Both sides are worth considering. Your mortgage lender will also assess your debt to income ratio to ensure you’re able to manage the monthly payments comfortably. A lower ratio can improve your chances of getting approved for a better loan with favorable terms.
- PMI. It’s in your best interest to avoid private mortgage insurance, PMI, by offering a down payment of at least 20 percent, assuming you can afford it. This is basically an extra fee collected by your bank to compensate for the additional risk of loaning to people offering smaller down payments.
- Inspections, repairs, and issues. What should you do if you make an offer on a house that turns out to have many structural issues? First, it’s important to inspect a house before finalizing any deal. If you do find things wrong with the house, you can negotiate to have them taken care of or have the purchase price reduced. Either way, you should make a plan for fixing up the property once you move in. This is especially important if you’re purchasing a rental property (including duplexes) since you’ll be responsible for maintaining a safe, hospitable environment for your tenants at all times.
- Closing. The closing process involves many steps and lots of hidden complexity, but for the purchaser, it’s usually quite simple. You’ll work with your loan programs provider, your agent, a title company, and sometimes other third parties to sign the paperwork, finalize the financing, pay closing costs, and transfer the title. This is usually done in a single day, though you may be responsible for finalizing some paperwork before that day comes.
- Home maintenance. As a homeowner, you will be responsible for making repairs and conducting maintenance. You won’t be able to do everything all at once, but if you’re willing to read home maintenance guides and watch YouTube videos on basic home repairs, you should eventually feel capable of tackling most low-level issues that come up. It’s helpful to build a roster of handymen and contractors you can contact for more complex jobs in the future.
How to Destress
Even after better understanding and demystifying these common concerns, you may feel stressed about buying a home. This is totally natural, but there are some strategies that can help you through this difficult stage:
- Find a good agent. Your agent will support you from start to finish.
- Get peripheral support. Find a good loan officer – and lean on friends and family for support.
- Take your time. This isn’t a race. Take your time to feel more confident about your decision.
- Focus on yourself. Searching for a home is distracting and time-consuming, but you still need to take time for self-care.
One of the best things you can do to destress, get more information about home buying, and ultimately make a better decision is to work with a real estate agent you can trust. At Green Residential, an Austin property management company, we have entire teams of real estate agents ready to help you find your Texas dream home. If you’re ready to get started, contact us today!
Luis is a dedicated Property Manager at Green Residential, having joined the company shortly after its founding in 2011. Over the years, he has gained comprehensive knowledge of Green Residential, allowing him to effectively assist both our clients and team members. Luis takes pride in his work and finds joy in helping others.
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