Home Sweet Home - Buying your first home
Amy E. Lemen
Buying your first home is quite possibly the biggest purchase you’ll make in your lifetime. But that shouldn’t send you running to the nearest rental. The fact is, homeownership is emotional, and especially so when you’re starting a new life with your partner. It’s a place to call home, to share your hopes and dreams – the literal foundation you’ll build your future on as partners.
It’s also a great financial decision to make together. The single biggest advantage to buying a home – besides having a yard and mailbox to call your own – is clearly about the money. First, you can take deductions for mortgage interest and property taxes on each year’s tax return – lessening considerably your overall tax burden as a married couple.
But the biggest benefit by far is building equity. For example, if you buy your first home for $400,00 and its market value increases to $500,000 in three years, your equity as an owner increases by $100,000.
You won’t get that kind of return from the stock market – even if the days of astronomical tech company valuations do come back someday. Of course, the housing market and economic conditions vary, so, like any investment, there is no guaranteed return. But there’s no doubt that buying a home of your own is a great investment.
Sign Me Up! Where Do We Begin?
Now that you’re convinced, it’s time to prepare for the home buying journey. The first step is coming up with a down payment. Don’t let this big chunk of change scare you. With today’s low interest rates and the willingness of many financial institutions to work with qualified first-time homebuyers, there are deals to be found that don’t involve coming up with a 20 percent down payment.
Of course, you’ll still need to put money aside – just in case. Start a house fund and decide how much you’d like to contribute per month, depending on what your timeframe and goals are. Many couples rely on help from families; that’s another option.
Next is getting pre-qualified for a mortgage loan. There is no better advantage when buying a home – and nothing more attractive to sellers – than buyers who have their ducks in a row and are ready to buy if the right offer presents itself.
Start by getting your financial house in order: pay off credit card debt, cancel credit cards you’re not using (banks determine debt by how much you COULD spend given your credit lines – not whether you’ve already spent it), and don’t make any large purchases if you have to (like a new car or a boat, for example). Ask for a copy of your credit report (you’ll each have separate reports) so you can clear up any errors well before you go for a loan consultation.
Buy for Now – and for the Future
Next, have a heart-to-heart talk about what you need and what you want in a home – keeping in mind that these two might be mutually exclusive. For example, you might want a pool, but you need a big yard for your two huge puppies.
The fact is that there are a lot of options, and deciding which is best for you depends largely on your lifestyle. What kind of space do you need? Do you need a home office?
The bottom line? Don’t over- or underestimate your housing needs. It might sound like no-brainer advice, but it’s pointless to make such a huge investment without thinking about the future and what you want. And financially, it’s wise to stay in your first house for at least five years to build equity. A lot can happen in that time, such as a visit from the stork.
Set a Budget – and Don’t Waver
Once you get pre-approved, stay within your budget – and not within the one that your lender says you’re qualified for. You’ll see that high whopper number and BAM! – It becomes very easy to buy beyond your means because, hey, the bank says you can. Ignore it. It is better to buy the home you need and can comfortably afford. House-rich and cash-poor is not the way to experience your first home purchase.
Finally, realize that there will be unexpected costs along the way (real estate taxes, home repairs, appraisals, homeowners association dues, etc.) – and prepare for them. Start socking away money into that house fund and you’ll be unruffled when closing day arrives.
Stay smart, ask for advice, decide what you really want – and then go for it! You’ll soon be in a home of your own – and off to a beautiful beginning together.