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Everything you need to know about buying your first U.S. home – According to Dakota Worrell

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Investing in the U.S. property market has long been popular with people from around the world. Quarterly homeownership figures from the Census Bureau show that homeownership rates for the United States stood at 65.9% in the fourth quarter of 2022. The increase is significant when compared to 44% in the 1940s. Interestingly, compared to the 1960s, when about 68% of Americans could afford a home, now only 43% can.

Many may say that now is not the right time to buy a home because of increasing interest rates and higher prices in areas with low inventory.

dakota
Copyright: Dakota Worrell

“Cycles come and go in the market,” says Dakota Worrell, the President of SLREIA. But, as a real estate owner of over 200 units, the 27-year-old property developer and real estate owner, he believes that trying to time the market is not as easy for long-time home purchasers as it is for investors.

“Homebuyers need to consider several things before making an offer. These include their net income, cost of leasing vs. buying, and how many years they plan to live in the home,” according to Worrell. “It’s always a good time to buy if your net income allows you to and you want to become a homeowner. Owning a home is a solid long-term investment.”

Renting vs. Leasing

For someone currently renting, a price drop in properties at a future date does not mean they will save any cash by waiting to buy. Therefore, if they have a credit score and a downpayment to purchase, they will save money by paying off a mortgage rather than paying for their rental.

Therefore, owning a home vs. renting makes financial sense if you have saved the money for a downpayment, have the credit score required, and can make the debt-to-income ratio.

However, Worrell warns that prospective buyers must factor in two important things when buying their first home – closing costs and move-in expenses.

Closing costs can cost anything from 2% to 6% above the down payment. With the slowdown, some buyers may pay less for these costs since lenders want to attract more customers. However, it’s essential to shop around since sellers often will pay a portion of these if they need to sell.

Moving into a new home often entails extra expenses like furnishings, repairs, or upgrades, something buyers should consider when using their savings toward a home purchase.

Picking the right home

Besides finding a real estate agent willing to work hard to find the right home for your pocket and needs, you must consider your lifestyle and budget when choosing the type of home and neighborhood.

It’s essential to buy with your long-term needs in mind. Therefore, choosing a single-family home versus a condo will depend on whether you want privacy, plan to grow your family, or want nearby access to amenities like schools.

Whatever their needs, buyers must remember that it’s important to stay within their budget instead of taking advantage of a lender’s offer for a larger loan or trying to beat a higher offer.

Knowing the best mortgages

The aim is to pay less in the long run, so as first-time homebuyers, you must research the best home mortgages.

Low or no down payment mortgages will mean paying more in the years to come. Adjustable rate mortgages may seem like a good idea when rates are low, but they can become unaffordable with rate increases. With a locked-in interest rate, the payment remains the same throughout the loan term.

Finally, 30 years remains the best term for a mortgage. They have lower monthly payments than a shorter loan and most people will stay in their first home for less than five years. 

Never forego a home inspection

There is nothing worse than buying a home with hidden surprises. Paying for a thorough home inspection allows the buyer to make an informed decision and negotiate a lower purchase price. When there are fewer buyers than sellers, negotiating a price becomes easier.

Local real estate agents understand the market best and can help you work on a strategy to drive a hard bargain according to the area’s current market conditions.

Bottom line

Having an education and owning a home continue to remain part of the American Dream. However, Dakota Worrell believes no one needs to feel pressured into buying their first home by a certain age. Since, for most people, their first home is not the one they stay in forever, stay within your budget and upgrade or move later.

 

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