The American Dream - Owning Your First Home is a Closer Reality than You Might Think

“I Too Am American,” a poem by Langston Hughes, an extremely moving literary work that speaks of what it is to be American, of hoping for that promise of the American dream. It is this poem that comes to mind when I think of the one true American dream, that of owning a first home.

Buying real estate, especially for the first time,  is a very ‘big deal.’ It is the ultimate symbol of adulthood, responsibility, prosperity, of the need to set down roots, and (in some cases) of raising a family.

Why not? After all, it is the perfect time to own a home; property prices are lower than they have been in more than ten years. Mortgage prices are also sitting at historic lows.  It is these two factors, more than any other that make this American dream well within the reach of most people. This is great news for first-time buyers. It is a time when you can buy low, and most likely, sell high.  But just to make sure you get that “Good Buy” we’ve set out a few pointers to help guide you along the way:

1-    The Timing

Make sure you are buying at the right time. Ask yourself a few questions that require hard-truth answers. Are you planning on moving in the next year or two? Can you rent a comparable home less expensively than you can buy one? Are you ready to make such a long term commitment? When you are buying real estate you need to think of it as a long term commitment; the era of flipping houses after a few months of ownership are long gone.

2-    Save Up

If your goal is to buy a home at a great price you need to start saving early on. Cash and good credit are critical in your getting a bargain on your home purchase.  The magic number here is about 20%. If you have a 20 percent down payment you can often avoid additional expenses such as that of purchasing Private Mortgage Insurance (PMI), an additional cost in your mortgage that protects the lender in the event of a default.

However, even first time home buyers without a substantial down payment, shouldn’t shy away from the buying process. Often lenders can find other ways of helping new owners find the down-payment amount.

3-    Credit Check

About a year before you plan to buy your house you’ll want to do an extensive credit check on yourself. Make sure all the information reported is accurate and take steps to remove any mis information, or report data that could benefit your credit report. Pay off as much of your debt as possible. If you have outstanding credit card debt, make larger monthly payments so you reduce these balances as much as possible.

4-    Get Pre-approved

The fastest way to find a great home at a great price is to get pre-approved for a mortgage. If a seller knows you are pre approved they are usually a little more enthusiastic about negotiate a final price. A pre-approved mortgage helps expedite the final purchase.

Bottom Line

Be realistic! No matter how much money you make, you need to shop for homes you can really afford. You don’t want to be stuck in a home that will take most of your monthly income. Remember, you’ll also need to make insurance payments, pay taxes and pay a certain amount in monthly maintenance expenses.  Planning for your first home purchase is essential to your getting a bargain, an investment that will give you a higher return within a few years.