For some it seems like a no-brainer. Renting a home can often feel like throwing money away, offering no sense of ownership in return. However, for many, the idea of buying a home is appealing because it is an investment. Even if you have to finance your home purchase, and even if it takes up to 30 years to pay off the loan, you have been living in your investment and, ideally, building equity.
However, there is more than meets the eye with many first time home buyers, who see homeownership as laced with blind spots and pre-loaded with anxiety — mostly because they are going into it fairly blind, without enough education and information. According to a new study by Framework, many first time home buyers felt unprepared for their purchase. The study compiled data from surveys completed by two groups: recent first time home buyers and prospective first time home buyers.
The report says only 41% feel very well prepared for the home buying process. Fifty-seven percent worry they can’t afford homeownership, while 47% think the home buying process is “rigged” against the buyer. Forty-four percent of buyers fear making costly mistakes, and 55% said they could use an independent advocate to coach them through the process of home buying and homeownership.
On top of that, more than half of first time home buyers in both groups said buying a home was more difficult than it should be.
So what does this tell the average real estate professional or mortgage loan officer? That they may have fallen short of making their buyers literate enough to have confidence in the process? While, once they had been through the process of buying a home, 64% of responders said they emerged from it knowing a lot more about the financial aspects of it, most wished they had taken some kind of class to prepare them for it.
Those in the industry may have been missing the mark in explaining aspects of homeownership not in their purview — things like paying taxes, how and when a payment can adjust, or promoting the idea of having a home ownership “slush fund” in the case of an emergency, such as flooding, a failing roof, or plumbing leaking underground. That doesn’t mean industry pros are purposefully neglecting to mention the less-than-appealing aspects and responsibilities of buying a home. Rather, because buying a home and owning a home can be a complex process, not every professional will be able to anticipate every scenario. For example, your real estate agent may not be able to prepare you fully for the mortgage application process. Likewise, your mortgage loan officer may not caution you on which neighborhoods are appreciating in value fastest. This is why it’s so important to surround yourself with multiple home buying professionals who can each provide valuable insight into their particular expertise. Furthermore, first time home buyers should absolutely feel encouraged to find classes or sources outside their circle of home buying professionals that address their concerns.
There are always risks inherent in any large purchase. But it’s up to the potential homeowner to decide if it’s the best financial step for them. Lenders and Realtors often offer courses for first-time home buyers, but they can also be found online as well.
Homeownership Costs to Consider (Beyond the Mortgage Payment)
CurrentMortgageRatesToday.org says that while the largest cost of owning a home will be your monthly mortgage payment, there are several other costs that you should be aware of when trying to find out how much homeownership will cost you — things like an HOA fee (and what it covers), property taxes, homeowner’s insurance, and utilities. And then there is maintenance and repairs.
Other homeownership costs that may not be as obvious up front can include…
- landscaping/yard maintenance
- pest control
- furnishing costs (if you’re moving into a larger home, you’ll likely need more furniture)
- the small stuff (light bulb replacements, air filter replacements, things that ordinarily are covered by the management company when you live in an apartment)