There are advantages and disadvantages to everything, and making the jump from renting to buying real estate is no exception. People make this upgrade at different times in their lives. Some are excited, others are apprehensive, but few have a balanced outlook on what being a first time buyer means. If you're looking to make the transition from renting to buying in the near future, here are some of the advantages and disadvantages to entering the real estate market for your very first time.
The biggest disadvantage, of course, is that you have no experience with looking for property. Unless you do a lot of research, you won't be able to tell whether a home is priced above, below, or at market value and you won't be able to decode the common buzzwords used in real estate listing language. For this reason, we highly recommend that you hook up with a real estate agent for your first home purchase. It won't cost you anything extra because the commission comes off the seller's profits.
Here is a guide to commonly used real estate lingo
There are, however, advantages to being a first timer. Owning property is much more beneficial for the health of a city than renting it, because you'll be paying property taxes. Therefore many cities offer tax incentives and grants to people who are moving up in the world. And if you're willing to forgo a brand new build in favor of a fixer upper in a neighborhood that could use a few responsible property owners like you, you will have the opportunity to create more equity with your own sweat rather than just your cash. A home that's looking a bit rundown can be greatly improved with a coat of paint, and if you're not up to the task yourself, there are still ways to get it done inexpensively that can pay off on resale. Talk to a company like Student Works Painting for example.
Of course, when you're searching for your first mortgage, you'll need all the help you can get financially. In the wake of the financial crisis, which was caused by indiscriminate mortgage lending, banks are much more wary of giving a mortgage to a first timer unless you can prove that you can pay it back. Be prepared to present proof of employment, lay out a down payment of about 20%, and perhaps even get a more financially secure relative to cosign the loan.
Paradoxically, at the same time that banks are worried about you not being able to pay back your loan, they're also looking to court you away from their competitors. More clients is more business, so when you go to buy your real estate you may find that as a first timer you'll be offered everything from deferred interest to free iPods for choosing one bank over another. Try not to get carried away by offers. It's the interest rate that's more important, and newbies may not know the best rate.