How First Home Buyers Can Avoid Foreclosure Risks
First home buyers appear to be over-represented when it comes to mortgage failures and foreclosures. For many couples, the loss of the first home can be a dream-shattering experience, and one that sours them for home ownership for many years. If you are a first home buyer, it is important to look at why you may be at risk of mortgage failure and foreclosure in the future.
One piece of advice that is not often said relates to the emotions of buying that first home. As exciting as it is, you need to get your head out of the clouds, plant your feet firmly on the ground, and consider the whole process in a business like way. Emotions cost people tens of thousands of dollars when it comes to buying a home, and unfortunately, first home buyers are at a greater risk of buying with their heart and not their head.
There are two factors that affect first home buyers long term – overcommitment and lack of home equity. Most home buyers try to capitalize on the maximum that lenders will allow. If a lender is willing to lend 95% on a $300,000 home, most first home owners zoom in on those numbers. A judicious home buyer would set their sights below that level – perhaps as low as $250,000. This allows plenty of leeway when it comes to market fluctuations, allows a first home buyer to quickly build equity, and keeps their repayments at well below their maximums .
With repayments below their maximum, first home buyers have a degree of financial freedom – they can make additional home payments that will either reduce the length of their home loan or cover themselves in case of illness or unemployment. First home buyers need to tread a little warily when it comes to buying a home and taking out a mortgage – otherwise, they may become another first home buyer with shattered dreams.
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