Owning your own home is not like renting, and you need to prepare to make it a great experience. It's different than you might expect, and you won't realize just how different until you've experienced it for yourself.
Owning Your First Home is an Investment
Rent and a mortgage are not the same. With rent, the money is being paid to the landlord and not earning you equity. With a mortgage payment, you are building equity in the value of your home. Owning your first home is a new investment.
Mortgage payments consist of principle (the money you borrow) and interest (the lender's profit). The faster you pay back the principle, the sooner your investment pays off. Even if you don't treat it like an investment, your home will probably be your most valuable asset.
Owning your first home is not just financial a change. This will be where you live, raise your family and entertain your friends. Home ownership has a lot of emotion attached to the process and results; however, don't allow emotions drive you into making an unwise financial decision.
Ideally, you want to find the interest rate that is right for you, and that isn’t too high. Higher interest rates not only result in higher payments, they impact the value of your investment. Factors that impact your interest rates include your down payment, credit history, your earnings and the term of the loan. Before shopping for your first home, educate yourself about these factors and be sure to pre-qualify for a mortgage before searching the real estate market. If you pre-qualify for a mortgage, you will be able to know what you can afford before you make an emotional commitment.
Owning Your First Home is a Responsibility
When you rent, the landlord is ultimately responsible for taxes, repairs, upkeep and maintenance. When you own a home, all of those responsibilities have to be handled by you. You are responsible for property taxes and need to maintain enough insurance to protect your investment. You are responsible for the upkeep of your yard and the structure of your home, and these things can add up quickly! Be sure you are financially prepared.
One of the most satisfying and economically wise ways to protect your investment is to do as many repairs for yourself as possible. But you can't do everything yourself. So, it's important to find experts you can trust to inspect the property before you buy. That way, you won't get in over your head with major repairs that appear minor on the surface.
Although home ownership is unlike anything you've experienced before, both the tangible and intangible rewards are worth it. For more first time home buyer education, download our educational eBook!