Now is an optimal time to invest for first-time homeowners interested in buying a home. There are multiple benefits to owning versus renting, and that’s especially true for first-time buyers.
7 Benefits of Buying a Home as a First-Timer
Here are some of the top reasons why we recommend speaking with a real estate agent and getting into the market ASAP if you’re a first-time homebuyer.
1. Home prices are going up
The real estate market continues to go up, which means it may be a while before you’d be able to take advantage of any market declines or future crashes. Buying a home now means giving yourself the chance to earn immediate, short-term equity.
According to movoto.com, listing prices in DeLand, Florida, and the surrounding areas continue trending in an upwards direction. The pandemic caused Americans to re-think where they’re living and whether their geographic location and the politics/culture align with their values. As a result, Florida is a desirable location for those making a change. You can read more about this in our post, Top Three Reasons Why You Should Buy a Home in DeLand Now.
While you aren’t necessarily purchasing at an all-time low, you’ll benefit from the continued boom, earning desirable equity and getting in while interest rates hold at record lows.
2. Interest rates are also predicted to go up
That brings us to another key point in terms of housing prices and timing. While first-time homebuyers may be hoping to hold out for a decrease in housing prices, the wait might not be financially worth it. Interest rates are going up. A recent article published in the real estate section of The Washington Post stated, “The Mortgage Bankers Association (MBA) is forecasting that the 30-year fixed rate will increase to 3.1 percent by the end of 2021 and 4.0 percent by the end of 2022.”
Another recent post on Investopedia.com warned, “If you need to buy a house soon, waiting for an ideal market to come about again may not always be realistic.” That quote is based on the fact that in almost all cases, taking advantage of lower interest rates is almost always a smarter financial move than waiting for housing prices to drop. We’d have to experience a real estate crash (not likely in the current climate) before prices would drop low enough to compensate for elevated interest rates for a 30-year mortgage term.
3. Zero-down financing for first-time home loans
Buying a home for the first time offers another benefit: zero-down financing. The financial wizards at Nerd Wallet assembled a list of 12 Best FHFC Mortgage Lenders of 2021 who offer first-time buyer programs. In most cases, these programs provide zero-down financing options.
In addition, if your credit score is on the higher-end, lenders may offer locked-in interest rates that are slightly lower than usual as extra motivation to secure you as a client. You should also speak to your real estate agent about local lenders who offer first-time buyer incentives. Even single point or half-point incentives can save you thousands.
4. Your home is an investment that yields predictable returns
Yes, the real estate market is going up, and what comes up must come down. That said, most investors consider long-term real estate holdings to be a predictable foundation for returns on their investment.
According to the National Council of Real Estate Investment Fiduciaries (NCREIF), residential and diversified real estate investments held for an average of 25 years yield returns of 10.3%. That is notably higher than the average yield from a low- to a medium-risk investment portfolio. The rental market in Volusia County supports that. Even if you decide to move, the rent you’d earn from future tenants or listing your home as a vacation rental can cover the mortgage payments until the timing is right to cash in during a future real estate bubble or boom.
5. You become your own lender
Need extra funds to pay for a roof repair? Need extra funds to send your kids to college? Ready to finally complete that long-awaited remodel or add-on? Your home’s equity becomes “your lender,” so to speak. Assuming you’ve made mortgage payments on time and your credit is still in the higher range, you can tap into existing equity for home equity loans or lines of credit – depending on your needs and the situation.
The money you pull out is added back onto your home loan because the home itself is used as collateral. It’s a great way to gain liquid funding without overextending your budget or future financial health.
6. Capitalize on tax advantages
When you pay rent, landlords not only benefit from monthly incomes and growing equity, they also reap tax advantages that renters have no access to. As a homeowner, you’re privy to certain tax advantages. The most common is the mortgage interest deduction. However, speak to your financial advisor about how buying a home may offer additional tax advantages such as mortgage insurance deductions and property tax deductions.
Depending on how long you’ve owned your home, you may also be excused from capital gains taxes when you sell your home. That means, if you can show you lived in the home for at least two of the five years before selling your home, you don’t have to pay taxes on any profit you received from the equity.
7. Freedom to make it your own
While most landlords are happy to let you paint the walls or make some temporary landscape improvements (all of which benefit them in the long run!), they aren’t as keen on other, more permanent alterations. Plus, most renters understandably have no interest in investing money in a home that isn’t theirs.
Once you own a home, you have the freedom to make it your own. And, if you plan well, the changes you make will increase the home’s equity (aka “resale value”) for the future. Visit …Here’s What Buyers Look For Most to learn more about the upgrades and improvements that are most likely to increase home appeal and resale price down the road.
Are you thinking about buying a home in the near future? Schedule a consultation with the real estate professionals at Southern Exclusive Realty. We love supporting first-time homebuyers as they navigate the steps required to purchase a home, and we can provide a range of resources and lenders that specialize in first-time homebuyer incentives.
