The housing market has been pretty crazy over the last couple years, largely due to the pandemic. There are currently a lot more buyers than there are those willing to sell their home, which has put potential first-time home buyers in an interesting position. Additionally, home prices in the Des Moines metro have increased anywhere between 12% to 15% in the last year. If you’re looking to buy your first home there are many things to consider, and our financial professionals are here to answer common questions about homeownership.
Is it better to rent or buy a house?
Oftentimes we hear young people say they want to buy a house so they can stop throwing away money on rent, but renting is not a bad thing! It is simply paying for a roof over your head. Plus, renting is a more flexible option than homebuying mainly because there’s no transaction cost when moving out of an apartment like there is with a home.
When compared to home ownership, it’s not that different from being a new homeowner. In the first five years of a mortgage, most of your payments are going towards interest, so you’re not really building a lot of equity in that time anyways. Keep reading to see our top tips for purchasing your first home.
First-Time Home Buyer Recommendations
Please be patient! Patience is by far the biggest piece of advice we can give you. There is no need to rush into homeownership, so make sure you’re ready before getting started. Watch the market and plan ahead so when the day comes that you’re ready to pounce on a house, you’ll be prepared and feel confident about your decision.
Start saving for a downpayment early on. This is something you specifically set aside to put down on a house in the future. Down payments can range from 5% to 20% of the purchase price of a house so this is something that can take years to acquire.
Plan where you want to live and what type of house you want to have. These include your absolute “must-haves.” Purchasing a home, especially for the first time, is a big deal, so be sure to think about these things over a long period of time to ensure you know what exactly you want and need in a first home.
Stay within your budget! You don’t want to be “house poor” where most of your money is going towards your house payments like mortgage, property taxes, maintenance and utilities, but you are unable to save for other things. You should be spending 25% or less of your take home pay after taxes on your housing expenses.
How much money should I have before buying my first house?
As a first-time homebuyer, purchasing your home should be an exciting experience rather than a stressful one. That’s why we want to help determine just how much money you need in savings before purchasing your home to have a smooth buying process.
We recommend you save up 25% of the home’s sale price at the least. This way you can ensure you have the cash to cover a down payment, closing costs and moving fees.
Contact Compass Financial Services For More First-Time Home Buyer Recommendations
Buying your first home can be intimidating, but with the full range of experience our Des Moines financial advisors have to offer, you can pursue a smooth buying process and a home that is a blessing instead of a curse. For more tips on buying your first home, reach out for financial advice from the professionals at Compass Financial Services. We offer a complimentary initial consultation to everyone, and will work directly with you to create a plan customized to your specific needs and goals.
*The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.