Consulting a Financial Advisor Before Your First Home

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Buying a home for the first time can be a daunting prospect, given the dizzying decisions that have to be made. In one survey, more than half of first-time homebuyers in 2020 said their friends and family helped them secure the down payment; another survey reveals that only 26% of first-time buyers got adequate assistance. It can be overwhelming to face the financial aspects of home buying; on top of being able to afford the downpayment and monthly mortgage, you also have to ensure that additional costs for maintenance and repairs are covered.

Consulting financial advisors can be extremely helpful in this case. Financial advisors are equipped with the expertise to help prospective homeowners understand and navigate the financial terms, rates, and requirements of home buying. Fortunately, as more of these professionals are embracing remote work, they’re more accessible today. This same environment also ensures that they have the opportunity to build their skills and credentials with more advisors now taking online courses. Today’s online finance programs ensure that financial advisors are competent in financial theory and application for investments and financial planning. This allows them to navigate the financial aspect in fields like real estate to ensure that homebuyers have a comprehensive understanding. And with more advisors able to take an online degree, you have a much wider pool of talent to choose from.

Whether you have questions on how to save, how much to spend, and how to time your purchase, here are other reasons why first time buyers should consult financial advisors before purchasing a home:

1. Financial advisors can determine what you can afford

Defining affordability with a financial advisor is a crucial first step. Affordability takes into account what you can actually afford, including future cost considerations. As a safe baseline, annual housing costs should not take up more than 20% of your gross household income. This includes the principal and interest on any mortgage payment and the taxes, premiums, and ongoing maintenance costs.

Knowing what you can truly afford will not only safeguard you in the long run but can also help you choose a house that is adequate for your lifestyle. Maxing out the budgets you set for housing expenses can be tricky, and it’s always good to know how much of what you make can be dedicated towards this goal.

2. Financial advisors can give you better options

Perhaps you’re planning to buy your first home as a stepping stone to another. A financial advisor can continue to guide you even after you’ve left your first home. Once you’ve got some equity, your advisor can help you determine how much your next downpayment should be to maximize your savings.

Most financial advisors will tell you to prepare at least 20% of the loan amount for the down payment to avoid paying private mortgage insurance. This may be the better option since it will save you at least $100,000 annually. Financial advisors can also help you decide which type of loan is better for your needs and goals, whether it’s over the course of 10, 15, or 30 years. To take a look at the loan options we offer, click here.

3. Financial advisors speak from experience

An expert’s experience will give them the advantage of gaining knowledge that others may not be privy to. Financial advisors specializing in real estate can help clients negotiate better prices on their housing options.

For instance, many first-time homeowners may not know that money spent on capital improvements ultimately lowers tax bills once their home is sold. Spending money on remodeling can actually increase the resale value of your home. This is because of tax rules that allow you to add capital improvement expenses to the cost basis of a home, increasing its total profitability.

4. Financial advisors understand tax requirements

When you become a homeowner, your tax status changes along with your eligibility to claim certain deductions. Hiring an expert financial advisor can help you figure out your tax returns so that you can maximize your refund.

Even if you can do your own tax returns, having a seasoned expert for at least your first filing as a new homeowner can help you in the future. Financial advisors typically provide financial preparation services along with their standard recommendations.

Buying a house is an exciting and nerve-wracking experience. Whether you’re learning the latest market updates on the appreciation of interest rates and sales prices or figuring out the type of loan that suits you best, financial advisors are the best professionals to guide you through the process.

Curious to see what a home loan payment would look like? Use our interactive calculator

Need help with the financials of purchasing a home? Find a Loan Officer Today

Content by: Alicia London

Alicia London is a full-time mother and a freelance finance writer, hinging on her years of experience and insight in the industry. When she isn’t working, she loves to bake with her kids and tend to her collection of plants.

SHANE CHRISTOPHER

Nominated for Loan Officer of the Year by ASREB in 2017 and a Mortgage Loan Officer since 2013, Shane holds more than 30 years of customer sales and service career experience, Gilbert-based Shane Christopher serves as a Mortgage Advisor with Geneva Financial. He is renowned—and respected—for a hometown attitude of service with a smile and treating clients like family.