First-time Homebuyers’ Guide When They Don’t Have Much

Back in 2019, around 33 percent of all individuals who bought a property in the U.S. were first-time homebuyers, and their median age is 33, too. Of all the first-time home buyers, some 64 percent said that they did so out of their desire to get a home that they can call their own. This strong feeling of owning a home actually echoes through all facets of American society, first-timer or not.

However, it’s not all rosy for many Americans wanting to own a home. It was found out that some 13 percent of first-time homebuyers reported difficulties in coming up with the required down payment. The difficulties stem from basically various forms of financial debt — auto loan, student loan, and credit card debt.

Thus, it’s important for first-time homebuyers to know some tricks on how best to get their hands on their first home without bleeding out financially and emotionally. Here are some of the best pieces of advice for owning your first home when you don’t have much, to begin with:

  1. Don’t be an eager-beaver mortgagee. One of the biggest blunders committed by many first-time homebuyers is acting like eager-beaver mortgagees in their earnest desire to own their first home. As a result of their eagerness and careless tact, they end up getting unfair rates that made their lives difficult as they are forced to fork high monthly payments. The best way to avoid this terrible pitfall is to carefully weigh your options when it comes to the monthly rates that would go with your home mortgage — whether you’re most comfortable with adjustable rates, a fixed interest, or interest-only.
  2. Do some research. Knowledge, they say, is power. When it comes to buying a home for the first time, this can never be truer. As such, you have to do some research about all listings with identical rates and features that are most desirable for you. This will allow you to find the cheapest listings possible so you can zero-in on the ones that you’ll eventually bid for. Once you have narrowed down the field, you should do further research by asking the listing agent some relevant questions about the property, like why it is being sold. Knowing such details will help you make the right bid price that stands a higher chance of being grabbed by the seller.

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  1. Never be afraid to negotiate the price, but be tactful when doing so. It’s important for you to try getting some wiggle room in terms of the eventual selling price of the home you’re planning to buy. As such, you should not shy away from negotiating the seller’s asking price so you can save some dollars in the end. However, be sure that you will negotiate as carefully and tactfully as possible to avoid putting off the seller. If you have an agent working for you, consider having your agent present your offer on your behalf since real estate agents are well-versed with negotiating prices.
  2. Set your budget and stick to it. If you don’t want to end paying monthly rates that are way above your take-home pay minus all other expenses, you have to set a realistic budget (preferably with some wiggle room) and be sure to stick to it. If you have determined that you can easily afford a property worth $400,000 on an x-amount of monthly payment, there should be no reason why you would go beyond that and choose a home that has a $500,000 selling price.
  3. Consider borrowing against your life insurance or 401(k). Many first-time property owners are not aware of the possibility of borrowing against their life insurance policy or 401(k). Well, the truth of the matter is that this route may be the road less traveled but it is a road worth walking on if you want to easily afford your first home. However, be sure to take careful note of the potential drawbacks of these options so you won’t end up regretting your decision.
  4. Ask for a gift or find a co-borrower. If you are on good terms with your parents (if you’re still a young adult, that is) or grandparents, and they have the money to spare, you could politely ask them to give you a cash gift that you can use to settle the down payment for your first home. Whoever your donor would be, they would have to pay what is called a gift tax, so be sure to let them know about this if they’re not aware of it. Another avenue that you can explore is looking for a co-borrower who would be willing to help you out by standing as a guarantor. However, just be sure that you won’t default on your payments since your co-borrower would bear the financial brunt of your inability to pay your outstanding arrears.

With these tips to guide, you should have a relatively painless experience getting your very first home.