Homes for First-Time Buyers: Everything a Rookie Should Know
There is nothing quite like that very first home for first-time buyers. Buying a house is a big step that can be exciting, terrifying, and everything in between. Realtors who help find homes for first-time buyers are used to answering a lot of questions and walking clients through the process. We’ve compiled some of their best tips and advice.
Are You Ready to Buy a House?
For those who are tired of a controlling landlord, too-close neighbors, and making rent payments with nothing to show for it, owning a house can seem like heaven. But there are tradeoffs between renting and owning that first-time home-buyers need to understand in order to know if they are truly ready.
- Homeowners have the freedom to do as they please with the house. The tradeoff: There is no landlord to call when something breaks or who will refresh the living space with new paint and carpet every few years at their expense.
- Moving away means having to prepare a house for sale instead of simply waiting for the lease to run out. The tradeoff: Proceeds from a house sale means the owner doesn’t walk away empty-handed.
- New homeowners may find their extra money going toward the house instead of vacations, hobbies, etc. The tradeoff: Fulfilling the dream of a home of one’s own can be worth it.
- Buying a house is a huge investment. The tradeoff: ownership means equity in a tangible piece of property with the potential of increasing in value.
In addition to deciding if they are up for the financial and lifestyle changes that come with buying a house, another important consideration is how long they plan to stay there. Luckily, St. Louis has one of the most favorable break-even points in the country. Here, it will take buyers less than 4 years to reach the break-even point where homeownership expenses are “worth it” compared to the cost of renting.
How Much Do Homes for First-Time Buyers Really Cost?
Deciding whether a house is affordable involves more than simply comparing a monthly rent payment to a potential mortgage payment. The following must be considered too:
- Down payment. Advice differs on the exact percentage of a house’s asking price to put down as a down payment, but bigger is usually better as it reduces monthly mortgage payments. Favorable interest rates, however, make it easier to put less down and still make it affordable.
- Credit score. Bad credit can make a first-time homebuyer too risky for lenders. Some buyers may benefit from working to build up their credit before getting serious about buying. The good news is, in the long run owning a house can improve a credit score, provided payments are made on time.
- Inspections. Paying for a home inspection is money well spent, as it will uncover hidden flaws or potential problems. If the seller isn’t going to take care of them, add paying to fix those issues to the budget too.
- Closing costs. Luckily for buyers, sellers are responsible for the bulk of closing costs. But first-time buyers need to be prepared to pay the lender’s administrative and processing fees to prepare the loan, homeowner’s insurance, property taxes, and other incidentals.
- Ongoing expenses. Owning a home means no more landlord to be responsible for repairs, maintenance, remodeling and updating, insurance, and taxes.
First-time buyers will increase their house-hunting options by saving and working on their credit scores. Shopping for a lender before starting to search for a home is a good idea. It can be eye-opening to learn precisely how much they can afford. And getting a pre-approval letter will get them one step closer to their goal of making an offer.
Is There Something Specific to Look for in Homes for First-Time Buyers?
With pre-approval for financing in hand, the fun can begin: looking at houses. Because of the pandemic, home shopping is a bit different than it was just a year ago. Our article Virtual Tours, Home Shortages, and Other Ways Real Estate Has Changed Going into 2021 gives an idea of what to expect.
The obvious things to look for when choosing a first home, or what many call a starter home, are price, size, and location. For example, a young couple hoping to start a family may look for something with extra space and in a good school district. These things may not be as important to a single person leaving his or her parents’ home for the first time.
There is no specific type of home that is best for first-time buyers. The same goes for the various parts of St. Louis where they can buy. Houses and neighborhoods are very much a personal preference. There is no right answer, just what is right for them.
The things that every first-time buyer should look for are:
- Affordability. The house must be affordable, not just based on its asking price, but also adding in what it will cost to live there.
- Sufficient space. If a house will be outgrown quickly, or if it is too large to take care of, it is probably not the best choice for the buyer.
- Good location. It is important to find a house in a place that meets the buyer’s needs—whatever those may be: quiet vs. bustling, near work vs. remote, urban vs. suburban.
- Good condition. Some amount of maintenance is necessary with any house, but first-time buyers need to be realistic about the amount of work they want to do. The time and energy needed for major DIY projects are not for everyone.
- Lifestyle. Do the house and neighborhood match the desired lifestyle of the homebuyer? This is an important factor or whether or not they’ll be willing to stay at least until they break even.
Find the Best Realtor
The key to getting first-time buyers into the right home for them is finding the best real estate agent in the area. This is too important a transaction to leave in the hands of just anyone. Buyers must find someone they can trust.
Some fundamental traits to look for:
- Someone who listens and understands what the buyer needs and wants in a house.
- Exceptional knowledge of the local market.
- Top-notch negotiating skills.
- Verifiable stats, such as consistently getting a purchase price well below the asking price.
The agents at Berkshire Hathaway HomeServices Select Properties have all of these qualities and much more. Contact them today so they can begin the process of getting you in your first home.
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