Becoming a homeowner is something almost everyone hopes to do one day. Whether you’ve spent your whole life planning for a dream house or simply see it as the best financial and practical step toward success, it is a major move that is equal parts thrilling and scary.
Unfortunately, there is no shortcut to get there. The only way to get experience is to actually go through the whole process. Until then, there will be some aspects of this journey that remain unfamiliar and hard to manage.
Still, you can make things easier. By studying up and knowing what to expect, you will be much better prepared to navigate these tricky waters. And if you start by focusing on the following few areas, you’ll be well on your way to turning your first purchase into a great experience.
1. Focus on the Right Location
Location, location, location. It’s the biggest cliché in real estate. But it also happens to be the biggest truism. There are just some places where, barring a full Great Depression, a home is almost certain to increase in value over the years. Other places, it’s more of a crap shoot.
Then again, even with all the attention now given to a house being an asset, some people are still just looking for an actual home. They want to buy something and live there forever. Regardless, the same advice largely applies. There is nothing more important than where you are. And this extends to everything from curb appeal and school districts to lawn space and where the sun hits the house. Pay more attention to this than anything else.
2. Learn About Rates and Financing
The actual financial process of buying a home is always something of a learning curve. It’s more complicated than any other type of purchase you have likely made up until this point in your life, and there are just so many steps from financing and bidding to closing and actually moving in.
One obvious concern for many buyers is understanding the difference between fixed vs. variable mortgage rates. While variable rates fluctuate with the prime lending rate, a fixed rate will be locked in over time. Both can have benefits, and these days many people seem to prefer knowing exactly what that number will look like for the entire life of the mortgage.
Along similar lines, it’s also great to look at HELOC rates in the area to know what type of access to credit you may have down the line. This is one thing that many novice buyers don’t think to research — until they need it and realize they are upset with the available options.
3. Understand the Value of Buying for Now
As previously mentioned, some people are looking for a permanent home on their first purchase. This is certainly one mentality to have, and there is certainly nothing wrong going this route. This goal, however, must be balanced with reality.
If you’re young and early in your career, it is unlikely you can truly afford your ultimate dream home already. And you should not overextend yourself simply to reach for an emotional need that isn’t really feasible given the current state of your bank account. Is putting down so little in your down payment really a good idea?
There is nothing wrong with seeing this first home as a starter. It is often the smartest route, allowing you to stop throwing away money on rent while potentially gaining some value in the form of asset appreciation. Especially if you have an expected career path and know how your next few years are likely to play out, setting a timeline — whether three, five or 10 years — to stay in the first home can be a great way to set yourself up for financial success going forward.
Home Buying for Success
Buying your first home is as exciting as it is terrifying. It’s a big step for anyone. And so much of society’s conception of success is tied up in becoming a homeowner. But it doesn’t have to be overwhelming. You just need to do as much research as possible beforehand and then go into the process knowing there will still be some surprises.
Try to focus on the big-picture stuff. Always keep location on the front of your mind, familiarize yourself with the different types of rates and financing available, and understand that buying what you can afford today will keep you from overextending yourself in chase of a dream.
If you manage to stick to these types of issues, you will be well ahead of the game. This doesn’t mean everything will go perfect. That’s almost impossible. But it will help everything go as smoothly as possible — and keep you from losing your mind in the process.