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Tips for first time buyers
Buying a home can be one of the most memorable and exciting times in anyone’s life.
For first time buyers, building the wealth to buy a home can sometimes take years to accumulate.
In this day and age, first time home buyers are turning to alternative sources to buy their first home. There are a few things that first time home buyers should keep in mind that makes the process a lot easier.
Kelly K. Spors from The Wall Street Journal Online, gives some pertinent tips for buyers in her article, “How to save for your first home as buying gets tougher.”
“It's a dream of many young adults to buy a first home. But there's an unfortunate reality: Even buying a "starter home" with today's lofty prices can mean saving tens of thousands of dollars for a down payment. How do you pull it off? The key, obviously, is to save like crazy.”
Other than saving up a storm, there are a few things you can do to help buy your first abode.
One thing is to put down a significant down payment. And by significant that means at least 20 percent. Although many lenders nowadays will let you apply a down payment of a much smaller sum, sometimes even nothing, it is strongly recommended that you save up so you can pay 20 percent.
“The risk of putting down too little: If the home falls in value and you sell at a loss, you'll owe more to the lender than you receive from the buyer.”
“In addition, many mortgages require buyers who put down less than 20% to get private mortgage insurance, which can add $80 to $100 to your monthly bill. And the less you put down, the higher your loan balance and therefore your monthly payment will be.”
One helpful way to start saving for a down payment is to start a separate savings account just for your down payment. This way, you do not have to worry about mixing up the funds set aside for your down payment with your regular savings.
When saving up, or just thinking about taking out a mortgage, it is helpful to think of a timeline.
“How best to invest down-payment money depends on your time horizon for purchasing a home. Those planning to buy in three years or less should put the money in conservative investments such as short-term certificates of deposit or short-term bond mutual funds to shield themselves from potential market downturns.”
During these times when it is getting harder and harder to buy a home, many are turning to gifts from family and friends to achieve their dreams.
“Nearly 23% of first down payments come as gifts from relatives and friends, according to a recent survey by the National Association of Realtors. While such assistance is great, there are also other places you can look. There are many down-payment assistance programs for first-time buyers that are offered by banks, local governments and charities. Many are open only to low- or moderate-income buyers and some are targeted to specific communities.”