Longboat Key is a beautiful barrier island off the coast of Florida known for its crystal blue waters and pristine white sand beaches. The residents are dedicated to preserving the island's natural beauty and peaceful atmosphere, making it a popular destination for those across the United States who are seeking a quieter way of life.
Searching for homes for sale in Longboat Key can be daunting. Even when the real estate market favors buyers, homes in Longboat Key are typically in high demand. Buying a home for the first time can be a daunting experience, as it is a significant investment into the future. Let’s discuss some advice for first-time home buyers that can help them decide if it’s time to make the leap to owning a home in Longboat Key.
Rental costs are increasing
Rental prices have only continued to rise with inflation, doubling and even tripling in some markets in the past year. Paying increasing rent can make budgeting for housing expenses and saving for other financial goals more difficult. To avoid feeling like rent payments are a poor investment and to build equity for the future, purchasing a home may be a better option.
If prospective buyers are drawn to greater stability month-to-month(a lot of rental properties aren't rent-controlled, making the financial futures of renting uncertain) more agency over their homes, and a sense of fulfillment in owning a home, it may be time to consider moving on from renting. While a mortgage still requires monthly payments, it helps to build equity and increase the value of assets through home ownership.
Prior loans are responsibly managed
People buy homes every year with outstanding debt, whether it be credit card debt or student loans. Having prior loans and outstanding debt is not enough to disqualify a buyer, but mortgage lenders will look very specifically at the
debt-to-income ratio of the prospective buyer. The lower it is, the better-most lenders won't consider a buyer for a mortgage if it's higher than 43%.
If prospective buyers have worked their way from a previously high debt-to-income ratio to a much lower one, they'll be in a better place to get a strong mortgage. Consider as well that the more debt is paid off, the more available money buyers can put aside for home repairs, closing costs, or emergencies. The rule of thumb with debt is simple: the less one has, the more ready they are to buy.
Strong credit score
Similarly to having prior debt, having a rocky financial history isn't a disqualifier-the question is, where is a prospective homebuyer now? If one is approaching the
home buying process with strong credit, they'll get better interest rates and likely need to make smaller down payments. If a hopeful buyer isn't ready to put large dents in their outstanding debt, they can start by making monthly payments on time to build credit and then pay a little more than the monthly minimum when they feel ready. Dedication to saving to pay off loans and simply making payments on time can really boost credit.
The down payment won't be a financial burden
Many first-time home buyers easily forget about the upfront costs of purchasing their first home. As unfair as it may seem, buying the first home is usually the hardest. Other home buyers have money from home sales to help with down payments and closing costs on new homes, an advantage that first-time buyers simply don't have.
A down payment is typically
as low as 3%-6% for a first-time buyer, varying between conventional mortgages and programs like
FHA,
VA, or
USDA loans. Closing costs, due diligence payments, inspection costs, and title insurance also need to be considered when evaluating financial readiness to buy a home. There's a reason it takes years of saving to be ready to buy a first home and why making a down payment is often the biggest obstacle to owning a home.
Circumstances are changing
One of the biggest reasons new homeowners decide to buy is because they have outgrown a phase of their life that an apartment once represented. Perhaps they're engaged or married, having children and in need of a bigger home, relocating for work, or simply ready for a quieter life.
Major changes often catalyze home buying and the desire to put down roots. Notably, the
average age of first-time homebuyers is 36, older than in years past, but those looking to buy should make the move on their own time. As anyone knows, major changes can happen at any phase of life.
A 5-year plan is in place
On the flip side of circumstances changing, a good indicator that one is ready to buy a home is stability and predictability in certain parts of life. While certain "big moves" in life can be wonderful catalysts for home ownership, ideally, a few things are stable. Job security and buying with the future in mind are paramount when buying a home.
Buying a home with the future in mind entails buying a home that one can envision themselves living in for at least five years. First-time homebuyers cough up a lot of money upfront, and it may take 3-5 years to start building equity in a home when the amount of money that was involved in closing costs and a down payment is taken into consideration. If a homeowner moves before then, they will likely not recover that money.
Can't see staying in one location for five years? Don't move yet. Additionally, if a prospective homebuyer is currently renting and preparing to move, job security is paramount. Job security means a stable income, and that's important in mitigating the risk that first-time homeowners will default on their loans or not be able to make mortgage payments.
Ideally, first-time homeowners buy beneath their means, following the 1/3rd rule-the ideal monthly mortgage payment is 1/3rd of one's income. This can be harder and harder to find in today's market However, aiming to buy beneath one's means can give homeowners wiggle room in their finances, especially if they also have an emergency fund, alleviating the risk of not being able to make mortgage payments.
Call Longboat Key home
This beautiful slice of paradise is a beautiful place to call home. When considering calling it yours, sit down with financials and consider if now is the time to start exploring the Longboat Key real estate market. Are credit, debt-to-income ratio, savings, and long-term plans all checking out? If the answer is yes, it's time to start looking.
If you're
looking for a Longboat Key home, contact Judy Kepecz-Hays, expert Longboat Key real estate agent, today to start your home search.
*Header photo courtesy of Judy Kepecz-Hays
