First Time Home Buyer

Reasoning Behind Buying a Home

Purchasers need to make sure their reasons for wanting to buy a home are valid, and not merely a result of wanting to keep up with the Jones'.

Valid Reasons

Plenty of valid reasons exist for people to purchase a home, whether it is because they are looking for an investment or they need a place to raise their children. A home can be a smart investment since most homes appreciate in value over time. This makes the equity in the home a valuable safety net for many folks. In many cases, homeowners find themselves paying less money per month for a mortgage than they did with a rental. Buying a home is fulfilling the American Dream, after all, and a great deal of self-satisfaction can come from owning a home.

Not Always a Smart Buy

A home purchase will oftentimes be the single largest purchase a person makes in his or her lifetime, and the decision should not be made spontaneously without much research beforehand. People are known to purchase homes for reasons which may not be entirely logical:

• All their friends are purchasing homes.
• They are trying to save a marriage.
• They are pressured by family members.
• They want to impress people with their huge purchase.

Walking away from a defaulted mortgage because you weren’t ready for the purchase after all is not a simple task, so buyers must be sure that they are ready for the responsibility of a home loan before going forward.

First Time Home Buyers Beware

Many unscrupulous lenders exist who look to prey on unsuspecting first time home buyers. Since buying a home can be a complicated process, it is all too easy for a lender to slip some extra fees into a mortgage loan in hopes that they go unnoticed. Other lenders will tout a mortgage loan product as being special for first time home buyers when in fact the loan has complicated terms and higher interest rates. While it is true that some lenders do offer great products for applicants who are purchasing their first home, buyers must be vigilant in reading every bit of information presented to them by the lender. Make sure that Incredibly Low Interest Rates does not actually mean variable interest rate with a balloon payment.

Finding a Good Lender

Buyers who obtain a loan guarantee through the Federal Housing Administration (FHA) or the Veteran's Administration (VA) can take solace in the fact that these organizations limit the junk fees and other costs which might be attached to a mortgage. This means that a lender who accepts FHA and VA loans has agreed to keep the costs to a minimum. Not everyone is eligible for an FHA or VA loan however, so buyers must take matters into their own hands:

• Demand explanations for every fee which seems vague or odd.
  • "Origination Fee" and "Document Preparation Fee" may mean "Extra Money for the Lender."
  • Be leery if the lender is reluctant to review all closing costs.
• Some lenders inflate the cost of valid charges.
  • Credit reports do not cost $100, and any lender charging this amount is pocketing the excess funds.
  • Couriers do cost money, but sometimes not as much as the lender is charging.

Buyers As Their Own Advocates

Obtaining a loan for a home is simply not the time to be apprehensive about demanding clarification. An honest lender will take the time to explain every cost associated with a home loan until the applicant is satisfied with the explanation. If a first time home buyer is not getting answers, it is time to find a different lender.