first time home buyer – owner loan

Carl Chesal asked:




The purchase of a first home is likely to be the biggest one-time purchase in your life. There is a huge shift from living with family or renting, to owning a home. It can be an overwhelming experience and at times you may feel that you are barely keeping in step with the process. We are now at a point in our lives where our children are buying their first homes and we see the worry and signs of stress that make this FIRST BIG PURCHASE such a momentous event for them. The learning gained from buying a home and selling a house six (6) times – four different cities and two different provinces – has given us experiences that we share here with our children. The tips we can give you when going through the mind-game process of buying a home are insightful and are especially for people just like our children – first time home buyers.

Every step along the way to becoming a property owner brings a new rush of questions.

This first-time home-buying torrent of questions can, at times, feel like you are fighting river rapids in a kayak. Just like novice kayaker, it is fear of the unknown in home-buying that creates the stress.

Can we afford this house?

Did we pay too much for this property?

Will we be able to make the monthly payments?

How will we pay property taxes and still have money for any maintenance and renovation costs?

Will we have a mortgage forever?

Notice most questions and fears are centered around finances. Not surprising then that this big purchase would cause you stress. Finances or Money is the number ONE cause of stress in our lives.

Our experiences can be the information that can help you steer the ship named ‘Home Equity’. Equity – the difference between the market value of a property and the claims (loans + mortgages) held against it.

Here are a TEN pointers that helped us and can help you through the psychological aspects of buying your first house (you might even experience an adrenalin rush):

1. Accept that buyer’s remorse will happen and it could overcome you early in the process of purchasing your first home. Buyer’s remorse is a natural feeling where we doubt ourselves and question our purchasing actions. It may last for months after you buy. These are natural feelings to have; a home is a large purchase with significant impact on your lifestyle. Remorse will give way to a contentment as you make this house your home. Buyers remorse usually lessens as you become more experienced in buying and selling houses.

2. Buy a House, Sell a Home. Buy to resell. Buy with resale in mind. Remember that this is your FIRST house purchase, and not likely to be your last. Within 3-10 years of buying a house you are likely to sell and buy a second, third, or fourth house. Perhaps you will buy more than that number. No matter the number of houses you buy, do so with the view that you will re-sell, make a profit, buy UP (larger home) and/or reduce your mortgage on subsequent house purchases.

3. Pay the minimum Down Payment on your first house – unless you are paying 25% or more against the total price of the house (this may provide you with some relief on the mortgage rate), THEN pay the minimum. Use your cash for legal fees and transfer taxes PLUS for household improvements (like painting), maintenance and furniture/appliances/tools purchases. Remember point number “2″ – this is your first home.

4. Don’t make yourself ‘house poor’ – Amortize your first mortgage to the limit (25 years plus). This will reduce the impact to your monthly cash-flow (mortgage + interest payments). Don’t concern yourself with paying down this FIRST mortgage in 5, 10 or 15 years. You expect to build equity in your first home to apply to your next home purchase(s). Remember item “2″ – this is just your first home.

5. Loans and Mortgages are a Fact of Life – settle into the idea that you will likely have a mortgage and some form of loans for most of your working life. Unless you come from “material substance”, i.e. money, or have won the lottery, you will have large debt for most of your life. Accept that you are likely not to be in a position to eliminate your mortgage until you have worked 20-25-30 years.

6. Shop around for your mortgage – mortgage hunting can be an exciting thing. Use it as a learning experience. Bankers, Mortgage brokers and Real Estate agents all want to give you the money! Talk to other first time home owners. Compare interest rates, terms of mortgage and payout penalties. It’s a numbers game – have fun with this financial aspect of home ownership by familiarizing yourself with financial terminology and ask those ‘mortgage financiers’ to break it down into layman’s terms so you can understand it.

7. Separate an ‘emotional’ buy from a ‘good’ buy – this ONE THING will be your biggest hurdle, causing additional stress between a couple in their hunt for the first home. Real estate agents may try to leverage (manipulate) this couple tension to their advantage – like getting you to buy beyond your means or buy NOW because other offers are on the table. As difficult as it may become, agree as a couple that if things are not right for you as a couple that you are willing to walk away from any house deal on the table. Be vigilant in reaffirming this point to each other.

8. Create a “Must Have / Would Like” list of features – accept compromise as an element of home buying – unless your first home is custom built, accept that you will need to compromise on some of the features you have on your list of features. Remember item “2″ – this is just your first home. Getting all the house features you want requires a longer term view – a goal on your next home.

9. Scope out any neighborhood in which you want to own a home – just like test driving an automobile before you buy it, walk around your potential neighborhood. Check out schools, shopping and city hall (use the web) for zoning (building projects), crime levels and types, community involvement. Talk to people who live and work in the area you are considering a home purchase.

10. Accept the fact that your current social lifestyle may shift a bit – entertain at home instead of going out on the town; mowing the lawn and garden maintenance might replace some of your gym activity; interior decorating and carpentry become new hobbies to replace Nintendo and X-Box.

11. Breathe – Breathing is good. Enjoy the rigors and rewards of home ownership. Learn and continue to educate yourself on home ownership.

First time home ownership can be a highly stressful situation. But buying your first home can still be a wonderful experience. Home buying and home ownership should complement your life and relationship with your spouse and family. You may want to do it more than once. Buy a House – Sell a Home. Make your house the home that others will want to buy. Be the Consumer, Not the Consumed.

Jeremy