Getting onto the property ladder these days is not as easy as it used to be, and for newlywed couples starting out on married life it can be difficult. Having a home of their own is very important and with so many problems in the property market these days, getting that first home is not that easy.
The property market
The economic downturn of a few years ago caused major problems in the US housing market, and while things have recovered from that time, there is evidence to suggest that the market is cooling once again. However, prices are continuing to rise, with the median sales price of a new home in the US at $305,000 in October 2014, an increase of more than 15% on the same time the year before. Evidence also shows that first time buyers are putting off buying a home. In 2014, first time buyers bought 33% of homes, down from 38% in 2013. It is forecast that the average home value is to increase by up to 3% this year and there will be further increases next year.
Remember that there are regional variations in house prices. It might be worth considering looking in a different area if prices in one area are too high. Larger cities tend to have stronger property markets than suburbs and rural areas, and therefore higher prices.
The financial side
When buying a home, newlyweds need to apply for a mortgage. There will need to be money for a down payment, then a mortgage is taken out to cover the rest of the cost of the home. The down payment could be as much as 20% of the value of the house and then mortgage payments will need to be made every month until the loan is paid off. This could be for as long as 30 years. It is no longer possible to get a loan without making a down payment. Before the economic crisis, around 43% of first time buyers were able to get a home loan without a down payment, but this caused a number of problems and it is no longer an option. The general rule is that the more that can be saved for the down payment, the easier it is to get a mortgage.
Generally, couples should combine incomes and then multiply that by three to work out the value of the house that is affordable. For example, if the combined incomes are around $50,000 then the house that can be purchased is around $150,000.
Factors to consider
When newlyweds are buying a home, they need to consider other things that could affect their eligibility for a mortgage. Debt levels will be taken into consideration and if there is already substantial debt they will not be able to borrow much for a home. Current credit status is also going to be a factor. Those who have a good credit history will find it easier to get a mortgage than those who may appear to lenders to be a high risk.
Buying versus renting?
There are a number of advantages to buying a home. The first is that homeowners can deal with things themselves instead of relying on landlords to address issues. The second is that buying a home makes it easier to put down roots and create something of your own. However, it is important to be sure that it is the right step and that finances are not being overstretched, as this could be a problem later.
Renting also has some advantages. Those who have a job that requires travel or some flexibility might prefer to rent as it gives the option to move on when they are ready to do so. It is important to remember that in some areas, renting is cheaper than buying.
Affording your home
When saving for that down payment there are plenty of things that can be done to cut daily expenditure. Remember that every little helps. That expensive coffee on the commute to work can be cut – making one at home will save a lot of money and for some people this could be a couple of hundred dollars each month. Next up, consider the car. Anyone using a car knows that they are not cheap to run and those who are still making payments could be paying far too much. It might be a good idea to think about changing the car to a more affordable model, perhaps with the help of a more affordable auto loan.
Affording a new home is much easier than many people think but there are so many things to take into consideration. Careful planning will help to make the process much easier for newlyweds keen to get on to the property ladder.