First Time Home Buyer

If you are a potential first time home buyer, you have probably already looked at the neighborhoods you want to live in, the type of house that you want to buy, and maybe even the type of furniture you want to put in your home. But have you taken the time to consider the advantages and disadvantages of buying a home in the first place?

There are many advantages that a first time home buyer can realize from the purchase of a home. The first, of course, is the pride of ownership. You will be able to do whatever you want with your home (subject to legal and zoning limitations), and you will not be subject to the whims and restrictions of a landlord.

A second advantage is that the interest and real estate taxes that you pa on your home are tax deductible. This means that you will likely have a hefty tax deduction in April for the interest and taxes you paid the previous year. This is also the case for most equity loans as well, so if you later decide to pay off credit card debt with an equity loan, you’ll probably be able to deduct that interest too.

A third advantage for a first time home buyer is the probability that your home will appreciate in value. In all but the worst housing markets, you can be sure that your home’s value will go up over time. Of course, the rate of appreciation varies based on the location and condition of your home, but you will likely see gains regardless of where you live, as long as your home is properly maintained.

What, then, are some of the drawbacks to owning a home? Well, one of the most significant disadvantages is that you will be responsible for all of the maintenance on your home, including the house itself, the yard and any trees or plants, any fences or storage buildings, the driveway, and sometimes even the sidewalk (depending on local laws). No longer will you be able to rely on a landlord to take care of these things for you. The first time home buyer often either forgets to budget for these expenses, or greatly underestimates them, and this can turn out to be quite a shock to a new homeowner.

A second disadvantage can be a lack of easy mobility. If circumstances require you to move within the first few years of owning a home, or during a “buyer’s market” (when supply is much greater than demand), then you might find it extremely difficult to move without taking a significant loss. You may either have to bring money to the closing table when you sell your home, if the value of your home has not increased enough to cover your realtor’s fees, or you may have to continue paying the mortgage in addition to your new housing payment until your home sells. Otherwise, you may simply not be able to move.

For many people, the advantages outweigh the potential disadvantages, and buying a home makes more sense than renting. However, it is important for a first time home buyer to consider these factors carefully, to make sure the decision of buying a home is the correct one.