“Count the Cost” Of Becoming A First-Time Home Buyer (Part 1)

posted Sep 3, 2013, 7:24 AM by Willie T. Butler   [ updated Feb 4, 2014, 1:51 PM ]

For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?   Luke 14:28-30 ESV

Ever watch any of the cable-network shows that feature first-time home buyers in the process of being shown potential homes?   One of the more popular of these reality shows refer to its buyers as “Property Virgins.”  Oftentimes these episodes feature young couples (or families) somewhere between the ages of 22–30 which, in this day and age, symbolizes early achievement towards attaining the coveted American Dream.

The episodes generally start out innocent with each potential buyer-couple being shown at least three different properties.  The host starts with a brief overview of the home-buyer’s qualifications for a loan followed by a description of their dream home.  This means they are looking to satisfy their wants, desires and aspirations in this first-time home buying experience.  This is why, in my view, the home buying process becomes suspect, at least to me.

Think about it.  A young couple usually both employed at fairly new jobs, usually well-paying jobs, are asked to describe the type house they are looking for.  What often surfaces as common among all the property virgins is a desire for a home with no less than 3-4 bedrooms, at least as many bathrooms and a kitchen with all upgraded amenities.  The husbands typically look for the must-have man-cave or a basement-room where he can set up the equivalent of an exclusive men’s club.  Even couples without children ask for guest-rooms as large as a typical master suite so that the bundle-of-joy they know will someday arrive will have plenty of space for growth.

When Is Enough Really Enough?

In all, these property virgins are typically shopping for a first home ranging in price from $250,000 - $400,000, and interior space averaging between 2,000 - 3,000 square feet.  Some of these buyers even seek up to 5,000 square feet of habitable space because:  1) they feel they can afford it (and deserve it),  2) it signals to others their perceived economic class and,  3) they believe lots of space is needed to entertain friends and family today, and to raise a family many years into the future.  I consider this process suspect because one essential ingredient that is never shown is whether these couples receive any home-buyer counseling beforehand … and, if not, why not?

Financial counseling would ensure that each potential buyer is not just financially qualified to obtain a mortgage but that they also understand the many factors that affect home-ownership both near-term and in the years to come.  For example, when setting your sites on a home you consider your dream home, yet you are only 25 years old, you should consider the following statistical facts about home-ownership:

 1.  According to the U.S. Census Bureau, among many sources, half of all first-time marriages in the U.S. end in divorce, and often because of financial differences. 

 2.   According to the OMB (Office of Management and the Budget) and the IRS (Internal Revenue Service), the median annual income in the U.S. over the past decade has hovered around $49,000.  And that includes two wage-earner householders.  Divided over 12 months, this implies an average gross income of $4,000 a month.

 3.  According to Fannie Mae and many real estate industry experts, the average length of home ownership (among first-time home-buyers) in the U.S. is six years.   Better employment opportunities, military service, divorce and separation (as shown in Fact #1), even extended job lay-offs are the common reasons for this short-term ownership.  Another reason is to upgrade to a bigger, more expensive (or rightly suited) home. 

 4.  Because of the recent Great Recession (2007-present), the national unemployment rate is still above the historical—and preferred rate—of  6.5%  This reflects the continued malaise and lack of confidence among the business community, and the lack of steady and certain employment which has been at the heart of increased home foreclosures and loan defaults.

These are just four of several considerations that make a commitment to repay a 30-year mortgage a decision that deserves more thought than whether the property is affordable today.  With the popularity of reality TV shows and the aggressiveness of realtors who are always out to make a market even under the worst of economic circumstances, purchasing homes without serious consideration of these facts has been bolstered, even encouraged by these realty influencers.  To these two prominent forces, there is always a buyers’ or sellers’ market to promote, no matter the economic climate.  So, truth is, it is just a matter of selling the benefits of same to the public.  Never mind that 3-4 years into home ownership any number of things can go wrong, even to no fault of the home buyers.

Remember, one or both new home-buyers could be laid-off.  One or both could get ill and incur a long-term illness.  And, worst, one or both could be fatally injured.  Homeowner’s insurance can make a huge difference where the mortgage balance is concerned, but will it provide enough (given such young ages) for everything else they will face in the decades to come? 

Is it possible one or more of these scenarios can happen to you?  Who really knows…  This is why proper planning from a Kingdom perspective is so much more beneficial.   Tell us whether you agree, and please read Part 2 of this article in the following week to get the full view—including recommendations—that the LifePlanning Institute offers.