Five Common Homeowner Questions for First-Time Buyers
Five Common Homeowner Questions for First-Time Buyers
Written by Rory Jeanne
For the exclusive use of growthbyncrc.com
In today’s housing market, first-time buyers are steadily becoming the dominant demographic. According to reports from 2021, up to 31% of all homebuyers were first timers. This represents the continuation of a trend that was shared in Bloomberg’s report on homeownership back in 2019. That report showed that first-time buyers were growing in number and getting younger in age.
Today, the average first-time buyer is single and aged between 22 and 34 years. Ultimately, these trends and numbers bode well for the housing market in many aspects. But they also indicate that there may be a lack of real estate experience among buyers. Because of this, it’s only natural that many first-time buyers should have several important questions. If you or anyone you know has just made a first foray into being a homeowner, here are five such questions you should ask yourself, your broker, or your prospective seller:
1. How Does My Credit Score Affect My Prospects?
Without a decent credit score, you’ll be hard pressed to qualify for a home loan. This is because lenders use your FICO credit score to determine your reliability in paying off debt. Usually, it is also the case that the higher your credit score, the more likely you are to get a lower interest rate. The good news is that an NBC report on credit scores showed that the average consumer score started going up in the early stages of the pandemic. According to FICO, the average score across the board reached 711 late in 2020, and some reports have it as high as 716 now. These increases mean that more consumers are more likely to be eligible for favorable loans. If you have a credit score on the lower end, meanwhile, you may still find a home loan. However, it may be a smaller one, or one that saddles you with larger repayments or higher interest rates.
2. Why Is the Neighborhood Just as Important?
A significant chunk of what you’re paying for when you buy a home is also the location. This takes into account the value, appeal, accessibility, safety, and reputation of the neighborhood your prospective home is in. Thus, even if you’re already sold on the home itself, you still need to consider its surroundings to properly assess its value. This is also important since location will also affect resale value.
For example, a Renovated listicle on property value states that homes near cafes sell for higher versus those with cemetery views that sell for 10% less. With that in mind, a few things you should look into location-wise are the proximity to major roads and commercial areas, the crime rate, the nearby school systems, and any future expansion plans. This way, you can better determine both if the big picture suits your needs and if the property will be of value down the line.
3. How Are Mortgage Rates Determined?
Some of the most common mortgage types include fixed-rate and adjustable-rate mortgages. As the names imply, the latter involves interest rates that may adjust, whereas the former is set for the whole term of payment. But keep in mind that interest rates in general (including those attached to your mortgage) are not just dependent on your personal circumstances. As explained in a guide to inflation on AskMoney, these rates are also affected by fluctuations in the purchasing power of money.
This means that when interest rates rise, inflation dips (and vice versa). This is because when people are able to borrow money at lower rates, the overall buying power increases. In relation to mortgages, a Yahoo report on surging mortgages reveals that current inflation is expected to increase the average 30-year fixed mortgage rate rise by 4.5%. As a potential homebuyer, this may mean you’ll need to adjust your budget plan.
4. What Are the Average Maintenance Costs?
In Bankrate’s survey of homeowners in 2021, the leading cause of purchase regret was that maintenance costs were too high. Specifically, about 16% of all buyers said that underestimating maintenance costs has caused them the most stress and regret. Thus, when buying your home, remember to consider how much upkeep will impact you. This means figuring out whether you’ll need to make any renovations, adjust utilities, make cosmetic repairs, and so on.
Admittedly, going through all of this can dampen some of the excitement you have for a promising property. However, factoring in maintenance costs early is a safer way to ensure that your first home will be comfortable and sustainable.
5. Is Homeownership Really Better Than Renting?
GROWTH by NCRC Managing Director Edward Gorman’s blog post on how Wall Street is attempting to convince potential homebuyers to rent instead makes some important points about the value of homeownership. He writes that homeownership is still one of the most important parts of the very fabric of American society.
Owning your own property, after all, provides you with a stable asset that you potentially can use (in the best of cases) to build multi-generational wealth over time. As such, while it may be a little more demanding, homeownership is often better –– from a financial standpoint –– than renting. Although the latter may seem more convenient in many aspects, only the former actually boost your assets and gives you something to fall back on.
Buying your first home is an exhilarating milestone everyone deserves to experience. However, to ensure that this is a real first step toward a happy and secure future, it’s best to ask the right questions throughout the process.