First-time Home Buyers: How to Buy your first home without it being a Financial Sinkhole

Published On: January 23, 2020|Categories: Buyers, First Time Home Buyers, Home Buying Tips, Tampa|Tags: Buying Tips, First Time Home Buyers, First-Time Buyers|

First-time Home Buyers: How to Buy your first home without it being a Financial Sinkhole

One thing that the housing and mortgage crash that began in late 2006 made clear was that a home isn’t going to be a financial investment in the future. While your parents or grandparents may have purchased a home decades ago and they’re sitting on major equity, that’s going to be much more of a rarity in the future.

Lifestyles have changed, and employment isn’t the decades-long home it used to be. People are moving around more, and employees change jobs and even careers much more frequently now than in decades past. With different estimates giving from 5 years to 8 years for a home purchase to break even after transaction costs, there’s less chance of people sitting in a home and building up substantial equity.

If a home isn’t going to be a financial retirement asset, then why buy one at all? There are a great many reasons for ownership over renting, and with low-interest rates, buying is often a better short-term financial decision as well. The more important consideration for the first-time homebuyer today is how to buy that home they want and not let it be a sinkhole for their cash assets.

New versus Existing Home

If you’re working with a builder who will give you a multi-year warranty on the major home components, then it could be a point in favor of buying a new home. However, keep in mind that today’s appliances often don’t start having problems for years, often 7 to 10 years in the future, so a two-year builder warranty on the appliances isn’t really a big concession, especially when the appliance manufacturers are providing at least one year of that warranty.

If the builder is willing to provide a strong material and labor warranty on major structural components, such as roofs, then it could be a selling feature. You’re not going to get this with the purchase of an existing home. Many home sellers will purchase a third party warranty policy for repairs to make their home more appealing to buyers. However, there are restrictions, deductibles, and service charges in most cases, so it’s important to read the coverage.

The existing home, depending upon the age, could have deferred maintenance issues, and will just naturally have more repair requirements in the first five years of ownership. Of course, if the neighborhood and other home features are what you want, just be sure to consider and budget for the repairs that will be coming in the future. Consider any appliance or major heating and cooling equipment to be at risk of failure if they are 8 years old or older.

The Perfect Home versus the Smart Buy

Especially for first-time homebuyers, the excitement of finding that “just-right” home with every feature and all of the current bells & whistles can result in poor financial decisions. Can you pass up a couple of features to save thousands of dollars? Every dollar you save on that mortgage payment is several thousand dollars you’ll save in payments over the years.

Have more than one home you like before you make an offer. You want to be in a stronger negotiation position because you have another option waiting, so you can walk away. Getting that price down a bit will make many thousands of dollars difference over the years. Don’t be afraid of bouncing several counter-offers back and forth to get the best deal.

Keeping these tips in mind can help you to buy a home you’ll enjoy for your lifestyle, but you’ll also have some money left over to save and for other investments.

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