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Here's how to scratch that first-time home-buyer itch

June 26, 2009

Are you and your spouse young professionals who want out of your crowded, one-bedroom apartment? Do you feel a strong itch to buy your first home now, despite your parents' protests that you should wait until the recession is over?

If so, you're among many in your demographic group seeking to buy this year, despite continuing uncertainty in the economy, says Merrill Ottwein, a real estate broker and a former president of the National Association of Exclusive Buyer Agents (www.naeba.org).

"Especially for people in their 20s or 30s with a kid in tow, the spigot has re-opened on demand," he says. "People are calling to say they want to move from a small rental unit to a suburban house."

Though he was cautious about advocating home-buying earlier in the recession, Ottwein says several factors have combined to make this a prime period for many first-time purchasers.

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"Mortgage rates are extremely favorable," he says. "Pricing in most areas is realistic and inventories are high, giving you lots of choices. Plus you could qualify for a sizeable home-buyer credit on your federal tax return."

Granted, not every couple who hankers for a cottage in the suburbs should try to buy now. One factor is job stability.

Here are a few pointers:

o Look to professionals rather than family members for advice.

Young people often seek counsel from their parents when considering major life decisions on career, marriage and financial matters, including home-buying plans.

However, during a recessionary period like this one, your parents may not be the best sources of advice on whether to buy a home, says Fred Meyer, a consumer advocate and veteran real estate broker in Cambridge, Mass.

He recommends you start with tutorials on home buying from a real estate agent who's earned your trust. Meanwhile, find a reputable mortgage lender who will take the time to educate you on the basics of real estate finance and calculate how much you can reasonably afford to spend.

Always go with the company with the best rates. Don't ever go with a variable rate unless you're planning to sell within five years.

o Factor the future into any housing choice.

First-time buyers are prone to short-term thinking and tend to view properties relative to their own current wants and needs, often failing to pay as much attention to their future plans as they should, Ottwein says.

For example, a young couple with babies should think beyond their nursery school period to the time when they'll enter kindergarten and thereafter. Indeed, the quality of neighborhood schools is a key factor in predicting how well property values will hold up in any community.

"Buying into a neighborhood with weak public schools is a lousy choice for home buyers, including those who intend to put their kids in private school," Ottwein says.

Besides neighborhood desirability, many factors can have an impact on future property values. Ottwein recommends you rule out any "oddball" home that differs significantly from others in the same area. For instance, scratch from your list the only house on the street without a garage, or a place that's much larger than the others because an oversized addition was put on.

o Take the home-buying process at a reasonable pace.

Prospective first-time home buyers now fall into two major categories: those who are reluctant to proceed until there are sure signs of economic recovery and those who fear the bargains will vanish if they don't move with unusual haste, Meyer says.

He recommends a thoughtful, conscientious middle course between these two extremes, adding "the idea is to do a rational analysis of your market prior to making any purchase decision."

Meyer says information on the local rental market can tell you a lot about asking prices for property in any area and help protect you against overpaying.

Copyright 2009 Ellen James Martin

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