The decision to purchase a home for the first time is not one that should be made lightly. While there are many benefits to homeownership, there are also many challenges. Owning is considerably different than renting. There's more freedom, but there is also more responsibility. Most people need to obtain financing to purchase a house, meaning they need to have good credit and the ability to pay for the house each month. Finding a house can be a struggle for some people, as they may have a long list of wants and a small budget.

Financing a New Home

Before a person can even start to look at homes, they need to be pre-approved for a mortgage. If a person has a history of poor credit or a short credit history, they need to build up or restore their credit before applying for a mortgage, so that they can be approved at a decent interest rate. People also need to have money saved for a down payment and they need to prove that they have a reliable source of income.

The down payment on a house is usually 20 percent of the price, but there are some programs that allow a smaller down payment in exchange for mortgage insurance. With an FHA loan, the buyer can put down as little as 3.5 percent of the home's value. The mortgage is insured by the FHA, so if the buyer defaults, the lender does not lose money.

1. Secrets of Getting a Mortgage With So-So Credit – Article from CNN on the ways a homebuyer can get a mortgage even without perfect credit.
2. Know Before You Go to Get a Mortgage (PDF) – Brochure from the Federal Reserve Bank of Boston answering common misconceptions about getting a mortgage.
3. How Much Home Can You Afford? – Mortgage calculator from Ginnie Mae.
4. How Mortgages Work: Introduction – Guide from Bankrate on mortgages for beginners.
5. Are You Ready for Homeownership? – Checklist for people considering a home purchase.
6. Let FHA Loans Help You – Information on FHA loans for a wide range of home buyers.

Finding the Right Home for You

Housing needs vary from person to person. A large family will need considerably more space than a single person. Some people care about specific details in the house or whether the house is brand-new or older. Many people create a list of things they must have in a house and a list of optional but desirable amenities.

1. Buying a House: What to Look For Inside the House – Guide to things to look out for when choosing a house to buy.
2. What to Look For Before the Inspector Arrives – Checklist of potential concerns in a home from This Old House.
3. How to Choose the Right House for the Right Reasons – Article on features that are a must-have in house versus features that are a novelty.
4. Must-Have Characteristics to Look for When Buying a Home – A list of important factors to keep an eye out for when purchasing a house, including location and school district.
5. Buying a Home That Needs Repair – Video testimony on purchasing a fixer-upper.

The Benefits of Homeownership

There are far-reaching benefits of owning a home. It can impact a family's social standing and provide financial benefits as well. People who have a mortgage are able to deduct their interest and property taxes on their federal tax returns, for example. The house may also increase in value over time. Unlike renting, a person does not need to keep making a monthly payment once the mortgage is paid off.

1. Benefits of Homeownership (PDF) – A list of economic and social benefits for owning a home. For example, children perform better in school when their parents own a house.
2. Buying Your First Home – A guide to purchasing a first home. Includes a list of advantages to homeownership.
3. Homeownership Helps Boost Children's Educational Achievement – Results of a study examining the impact of owning a home on children.
4. Even In a Stagnant Market, There Are Benefits to Homeownership – Report from the Brookings Institution on financial benefits of owning a home even when the market is not performing well.
5. Homeownership: America's Dream? – Report on the benefits of homeownership in lower-income communities.

Challenges of Homeownership

Purchasing a home may not be the appropriate move for some people. If a person takes out a mortgage that they cannot afford, they risk losing the entire house if they fail to make the payments. Homeowners are also responsible for the care and upkeep of the house. If an appliance breaks, they need to pay for repairs, which can prevent another financial burden. Property taxes are another concern for some people, as they can increase over time.

1. Shelter or Burden? – Article on the burdens of owning a home from the Economist.
2. Challenges of Homeownership – A list of the potential challenges faced when owning a home.
3. The Risks and Rewards of Buying a Home – Article from Forbes on the risk of home ownership as well as the benefits.
4. The True Cost of Owning a Home – A look at all the cost of homeownership, from insurance to taxes.