Tips for First Time Home Buyers
If you are considering making your first home purchase, congratulations! This is a time that can be very exciting as well as stressful. Rest assured, I will walk you through every step of the process and educate you along the way.
Do ask question and let me know your thoughts throughout the process. All of your questions and concerns are important, and I will make sure you have the information you need to make an informed decision.
Additional things to consider as a first time buyer:
- Financing is critical. If you have not yet met with a lender, I will give you some names of great lenders who are familiar with first-time homebuyers. You will have a number of different financing options including low down payment options that might be a good fit depending on your financial needs.
- Shop around for your money. Talk with at least two lenders to see what loan package is better for you. There may be a slight variations in interest rates or fees paid, which could equate to thousands of dollars over the life of the loan. Do shop around and talk to other people. Diverse situations can be addressed by different lenders.
- Follow your lender’s advice. Expect to account for all large purchases and deposits as your loan is getting approved. Don’t pay off any credit cards or move money around unless instructed by your lender.
- Know Where your down-payment funds are coming from. If funds are coming from another account or as a gift, discuss this with your lender so you can fill out the appropriate documentation and have the funds in place to close.
- Don’t get frustrated. As a first-time homebuyer, it may feel like you have a lot of hoops to jump through, but it is worth it. Consider that according to the National Association of REALTORS®, homeowners in 2013 had a net worth 36 times that of renters. Your patience will pay off!
Here is an example:
If You Rent:
| Monthly Rent* | Yearly Rent Paid | Equity | |
| 1st year | $1,900 | $22,800 | $0 |
| 2nd year | $1,995 | $23,940 | $0 |
| 3rd year | $2,095 | $25,140 | $0 |
| 4th year | $2,199 | $26,388 | $0 |
| 5th year | $2,310 | $27,720 | $0 |
* Increases 5% per year
If You Own:
| End of: | Monthly Payment* |
Value includes appreciation** |
Mortgage balance*** |
Equity**** |
| 1st year | $1,145 | $300,000 | $216,782 | $83,218 |
| 2nd year | $1,145 | $315,000 | $212,094 | $102,906 |
| 3rd year | $1,145 | $330,750 | $207,897 | $122,853 |
| 4th year | $1,145 | $347,288 | $203,530 | $143,758 |
| 5th year | $1,145 | $364,652 | $198,895 | $165,757 |
After five years, you may realize $30,263 in equity if you purchase (plus received possible tax benefits), but when you rent, you will have poured $125,988 into your landlord’s pocket!
* Includes Principle and Interest only on a 4.00% mortgage with 20% down with a purchase price of $300,000
** Appreciation rate estimated at 5% annually on a $300,000 home
*** Based on the declining principal balance
**** Difference between what you owe and the possible market value of the example home based on 5% annual appreciation.
