First-Time Homebuyers: Financial Missteps and Opportunities
Single women continue to outpace single men as homebuyers in the U.S. housing market. Last year, single men only made up 8 percent of homebuyers, while single women made up a whopping 18 percent, according to the National Association of REALTORS®' (NAR)
What are the most common financial missteps new homebuyers should avoid?
icking the right type of mortgage. If the price of the home is too high, the new homeowner might be tempted to pick an adjustable rate mortgage (ARM), or, even worse, an interest-only mortgage. The ARM rate can fluctuate after the initial term; for example, a five-year ARM purchased when the interest rate is 4 percent in a could then become a 6 percent interest rate, greatly increasing the monthly payment.
Interest rates have been edging up recently, but are still near historic lows, so assuming the new homeowner is confident they will live in that home for the foreseeable future, a traditional 30-year mortgage is probably the best bet. That rate is currently close to 4.5 percent, so be wary of ARMs, or, even worse, interest-only loans.
What's the easiest way to calculate how much home you can afford?
I strongly encourage people to consider the industry-accepted 28 percent rule, which means aiming to have monthly housing expenses (principal/interest/taxes/insurance) less than 28 percent of gross monthly income.
What are some tax breaks that first-time homebuyers can take advantage of?
How will the new tax bill impact homebuyers?
ortgage interest deduction is capped at debt for home purchase of $750,000.
What would you tell any first-time male or female homebuyer to keep in mind as they go through the home-buying process?