Buying a home is a daunting process, especially for a young person. For a long time I didn’t feel like I was old enough to buy a home. It felt very “adult” to me and in my early 20’s I just wasn’t there yet.
Image via Victorian Gothic Interior
If I could do it over again…
If I could do it over again, I would have put any and all savings towards a downpayment and have my roommates pay my rent. PEOPLE THAT LIVE WITH ROOMMATES… THIS IS FOR YOU! Buy a home and have your roommates pay your mortgage. My roommates and I spent around $2500/ month for our apartment in Los Angeles. Guys, that is a mortgage payment on a $500,000 house.
Image via Better Homes and Gardens
WHAT ABOUT THE MONEY?
Yes, money. Real estate costs money. For the longest time I just assumed that you needed 20% down to buy a home. FALSE. Have you researched different types of loans and what you qualify for as a first time homebuyer? You might be surprised to learn that you can buy a home with an FHA loan that allows you to put down as little as 3.5%. If you aren’t afraid to purchase a fixer upper, the 203k loan allows you to roll any home improvement costs into the loan and still offers you the 3.5% downpayment.
Sit down with a mortgage lender and go over what you can afford. You may be surprised to learn that a house is in your reach.
The average American only lives in their home for 5-10 years. Think of your home as a long term investment. Interest rates are at an all time low right now, how can your property make money for you?
YOU HAVE TO HAVE SOMEWHERE TO LIVE
My broker said this in a sales meeting one time and it stuck with me. You have to have someplace to live. Whether you are paying rent or a mortgage payment, you are paying for somewhere to live. Why not pay your own mortgage instead of someone else’s? For most young people it’s not the mortgage payment that is the problem, it’s the downpayment. So, put down those Tory Burch shoes and put that money in your savings!
LIVE IN A FLIP
If you have to have somewhere to live, why not live in a flip? Buy the cheapest, ugliest home on the block and make repairs as you live there. I realize this may not be for everyone but it’s an excellent way for a first time homebuyer to get into a home in a competitive area. If you are living in the flip there are no “holding costs” so when you sell, you should profit.
Image via Sebring Services
SO, YOU’RE READY TO BUY? HERE’S HOW TO GET STARTED.
DO YOUR RESEARCH.
Be an informed consumer. There are so many tools for homebuyers online. The National Association of Realtors says that 90% of buyers start their search online. Researching potential areas and real estate trends before you talk to your realtor helps you to be more informed in the buying process.
MEET WITH A LENDER.
Find out how much you are pre-approved for. A lender will give you an estimate for how much you need for your downpayment and closing costs. This will also help you get a good idea of your monthly payment. In a competitive area, you need to be pre-approved by a lender before you start looking for a home so you can move quickly towards making an offer.
SELECT A REAL ESTATE AGENT.
Selecting an agent for your real estate needs is an important step in the buying process.
Questions to ask your agent.
- How long have you been working with buyers?
- Are you a full time or part time agent?
- What areas and types of properties do you handle?
- How long have you been in business?
- Can you share references?