Buying a house is a significant milestone in life. It’s more than just a roof over your head — it represents stability, financial security and a place to put down roots. However, as anyone that has bought a home will tell you, the path to ownership is full of financial challenges, some obvious, some unexpected.
If, like me, you are planning to buy a house in the near future, you may be wondering what to look out for. Here are some of the common hurdles that I (and others) have faced while planning for homeownership.
Dealing With High Home Prices
In June of last year, home prices in the U.S. hit record highs. The median home sale price was $386,000 — and while prices have come down since then, it’s been a relatively small decline, meaning homes are still very expensive.
I live in San Francisco, where home prices are miles out of reach for the average person. The median price of a single-family home in the Bay Area was an unbelievable $1.25 million in April 2023. Like so many who live in high-cost-of-living areas, I’ve been completely priced out of the market, and have had to look outside the area for an affordable house. I don’t really want to move, but it’s a must if I want to buy, and so I finally settled on Oregon. This is a tough choice that you might also have to face depending on where you live now.
Saving for a Down Payment
Having a substantial down payment is just about a must-have these days. There are government-sponsored loans (VA and USDA loans) that will allow you to buy without a down payment, but both have a very strict set of criteria that must be met in order to qualify. Having served in the military, I happen to qualify for a VA loan. That’s great — but while zero down does make buying a home more accessible in theory, a down payment will decrease your loan amount, resulting in lower monthly payments.
After looking at home prices in Oregon, it became clear that my monthly mortgage payments would be unrealistic if I financed at zero down. I’ve been fortunate to be able to save enough for a decent down payment, and even more fortunate that my parents have been able to contribute some funds. This will absolutely be a key consideration for you if you’re going to start house shopping.
“One of the significant financial challenges that first-time homeowners often encounter is the struggle to save for a down payment. Many individuals find it difficult to set aside a significant amount of money while also managing their day-to-day expenses. It requires careful budgeting and long-term planning to accumulate the necessary funds,” said Denis Smykalov, broker at Wolsen Real Estate.
Considering Additional Costs
There are costs associated with owning a home beyond just making a down payment and paying your mortgage — and they may be a lot higher than you expect. Property taxes, homeowner’s insurance, utility bills, these all add up and need to be factored into your planning.
I was so dialed in on what my monthly mortgage payments would be that I had hardly considered how much these additional expenses would affect my monthly budget. My loan officer did a great job in educating me in this respect, and although it was a bit of a shock to learn that my effective monthly payment would be much higher than I thought, better to learn that early in the process instead of down the line when it could seriously impact your ability to pay the bills.
“Homeownership comes with ongoing expenses, such as property taxes, insurance premiums and maintenance costs. Many first-time homeowners underestimate the financial impact of these recurring expenses and may find it challenging to incorporate them into their monthly budget,” Smykalov said.
Everyone’s Situation Is Different
Some challenges facing prospective homebuyers are near-universal, but your personal situation may come with more or less difficulties than mine. For example, I am in the enviable situation of having zero student debt; as a veteran I was entitled to education benefits that allowed me to pay for my degrees without having to borrow. If you do have student debt, that’s going to be a big factor in your homebuying journey.
“Student loan debt can be a significant financial obstacle for first-time homebuyers. The burden of existing student loans can affect their debt-to-income ratio, making it harder to qualify for a mortgage. Buyers in this situation may need to explore alternative financing options or create a plan to manage their student loan payments while also affording homeownership,” continued Smykalov.
Whatever your personal financial situation, you’re sure to run into challenges when you decide to buy a house. Perhaps they’ll be like mine, or perhaps they’ll be completely different. Whatever the case, be sure to do your homework and look at it from every angle. Obstacles are just part of the journey — I hope hearing about my challenges will help you navigate your own.
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