Lessons from the Pros

Real Estate

10 Tips for the First Time Home Buyer

When you have a career in real estate, and have done extensive investing in real estate for much of your children’s lives as my husband and I have, you might expect that your children are pretty real estate savvy; at least I did. I felt that by osmosis my children should know all there is to know about buying a piece of real estate, especially since our youngest son is doing very well in commercial real estate. Reality is, they still have a lot of questions. So for your benefit and theirs, here is my top ten list of things to know or think about for first time home buyers.

A couple sitting on the couch in their new home with boxes all around.

The Top things any first time home buyer should consider are:

  1. Access Free Financial EducationCompare what you’re currently paying for rent to what you would pay to own a home, buy vs. rent. The keys things to factor in are:
    • A home is more than a mortgage payment. It is also: property taxes, homeowners insurance (this will be higher than renter’s insurance), additional utilities and routine home repairs.
    • You will have added tax benefits that could reduce your taxable income.
  2. Owning a home is often a great hedge against inflation. Rents will continue to rise but when a home is purchased with a fixed interest rate, mortgage housing costs will remain the same.
  3. You should be willing to stay in the home for a minimum of five years to get the most benefit.
  4. The average FICO Score that is required for a home loan as of February 2016 is around 720.
  5. The optimal down payment is 20 percent [there are very good programs for 5% down but you will have an additional monthly cost of PMI (property mortgage insurance)]
  6. It is important to use a real estate professional to help with negotiations, home inspections, contingencies and appraisals.
  7. Make sure you have a team accountant, real estate professional, mortgage broker and often a real estate attorney to provide you advice and guidance. They are the professionals but you are the one who needs to make the final decision on what is best for your situation.
  8. Start looking and narrowing down the location you are interested in but don’t make an offer until you are sure of the following things:
    • What you can afford as a first time home buyer (and have a pre-approved mortgage letter from the lender).
    • That the area fits your needs. Have a list of the things you must have, for example a back yard.
  9. Once a home loan has been approved do not apply for any additional credit, such as buying a car.
  10. That you won’t be house poor. Buy the house according to your needs but be sure that you will still be able to enjoy your quality of life.

There are many things first time home buyers need to take into consideration. This is just a small sampling. Buying a first home, or any real estate, is a big decision. Make sure you’ve done your due diligence and surround yourself with professionals that have your best interest at heart.

DISCLAIMER This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.

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