If you have recently decided to take that plunge and purchase a new home, the options often seem limitless. Potential buyers may get excited to think about features they would like in their dream home or the ideal neighborhood, but there are some major obstacles to overcome as you work through this process. It is important for all first time home buyers to understand these 5 obstacles beforehand in order to overcome them with little trouble.
For new home buyers, it will almost always be the down payment that is going to be the most difficult step in this process. Even if you try to trade a higher interest rate for a lower down payment, the down payment is going to require some patience or the buyer will need to have additional liquid assets. Currently, buyers can expect their required down payment to be in the range of 10 to 20 percent depending on a few outside factors.
The tastes and needs of new home buyers have changed in recent years due to a shift in the market as well as the age of the buyers themselves. Many are steering clearing of homes with larger yards or other features requiring upkeep, such as a pool, and are more focused on a comfortable, small building. More buyers than ever are conscientious of the location of the home and prefer to cut down on a commute and be near a city center.
Student debt is arguably one of the biggest upcoming factors when it comes to purchasing a starter home. Not only are graduates in more debt than ever, they are saddled with interest rates higher than ever. This will affect almost every part of the home buying process, ranging from their FICO and credit scores to their ability to make monthly payments on a mortgage or home insurance policy.
Prices may be recovering, but that does not mean that the housing supply is meeting the demand quite yet. Those that invested in a home 15 or more years ago may take a quick look at the estimated value of their home and postpone retirement or selling for a few more years. For homebuyers, this means that they not only have to wait for a new home, they may also are going to pay more when it does hit the market.
In 2009, a number of statutes went into effect that changed quite a few steps in this process including appraisals. Unlike before when lending companies could pick a local and experienced appraisers, they now pick from a pool of random appraisers. This can result in a wide variety of problems for both buyers and sellers looking to make the best on their investment. If the appraisal is too low, the owner will often hold out on selling, while high appraisals drive away buyers.
- Acquiring the Down Payment
- Matching a Home to Your Tastes and Needs
- Growing Student Debt and Interest Rates
- Homes on the Market
- Inaccurate Appraisals
While it may seem difficult, this process is not impossible. For first time buyers, the key is to remain patient and focus on building up a good credit score and the funds needed for a down payment.
