Property Prime: How To Afford Your First Home

I remember when I bought my first home – a dream come true. With the changing state of the economy, the price of houses, and the reluctance of banks to give out loans, it can be a big challenge to reach this milestone in life. In fact, for a lot of people, this can feel like an unattainable goal.  For one thing, the homeownership rate among millennials has dropped in recent years, due in part to a limited inventory of starter homes, and also to student debt payments monopolizing so much of younger workers’ income.  My oldest nephew and his wife had a difficult time and had to work hard to finally get their home. They both are teachers with a master’s degree and large student loans.  Affording your first home doesn’t have to be out of reach, though, and there are a lot of tools out there that can help you to seal the deal on your first property. Let’s explore a few tips to help you to achieve this goal.

 

 

 

 

Are You Personally Ready To Buy A Home?

 

Home ownership means you must have a budget to cover all the associated expenses besides the mortgage, taxes, and insurance:  home repairs, utility costs, garbage pickup, water, and electricity.  You don’t get to call the landlord and say I need a new refrgerator.  Look at your debt such as student loans, automobile loans, and credit cards,  You need to pay down your debt and build an emergency fund before you tackle home ownership.

 

 

Saving Tools

 

First you need to take a long, hard look at your budget, There are usually a few things that you can cut that will save you a lot of money, such as the cable plan you downgrade or those daily lunches you know you can prepare yourself.  Do you have to go to a coffee shop each morning for a latte?  You can make them at home and save a bundle. Now start a savings program to save the difference. You can set up an automatic transfer from checking to savings that will force you to save.

Now let’s look at apps to help you save.  Computers have just about taken over the world in the last few years, and most people are carrying a very powerful machine in their pockets at all times. Your smartphone is more than a communication tool, and there are loads of apps on the market that can make it much easier to save your money. Modern banking apps can automatically put money aside, giving you the chance to ignore your saving altogether. You just need to set up your saving pot so that it collects money each time you get paid. If you don’t have your bank’s app, be sure to go their website and check out their free app.

 

 

 

 

Build A Plan

 

While house prices change and it can be tricky to know how much your home might cost in the future, you can still make a plan with the information you have. Most mortgages will require a deposit of at least 10%, though it can be worth saving more than this to make sure that you can get a good deal from your lender. Your plan should include how much you’ll save each month, how long it will take for you to reach your goals, and contingency options in case things go wrong at any stage. You may not be able to predict your finances, but you can still prepare for them.

 

Shop For The Right Lender

 

There are lots of mortgage options out there, each with its own combination of pros and cons. If you’re struggling to come up with a down payment, check out these loans:

  • Conventional mortgages They conform to standards set by the government-sponsored entities Fannie Mae and Freddie Mac, and require as little as 3% down.

  • FHA loans Loans insured by the Federal Housing Administration permit down payments as low as 3.5%.

  • VA loans Loans guaranteed by the Department of Veterans Affairs sometimes require no down payment at all.

 

In addition to federal programs, many states offer assistance programs for first-time home buyers with perks such as down payment assistance, closing cost assistance, tax credits and discounted interest rates. Your county or municipality may also have first-time home buyer programs.

Some companies prefer to offer big mortgages to wealthy people, while others focus on offering loans for those with stricter budgets. Companies like Altrua Financial offer mortgages that are fair for people in all positions, with affordable interest rates and reasonable deposits that will make it easier for you to afford your home. Reading reviews for the lenders you’re looking at will always be a good idea. You can also use a mortgage broker to help you review multiple companies and I did that once. I’ve also used my local bank and credit union for a mortgage.  I do like having a person in a local financial office I can talk to.  Unfortunately, the modern world has pretty much done away with that.  My current mortgage started with one bank and after 2 years, that bank sold most of their mortgages to other banks.  I really have no relationsip with my current lender in another state.  

It makes sense to get pre-approved for a mortgage before you begin shopping for a home. I’ve always sort of backed my way into a mortgage.  I would figure out what mortgage payment I could afford, and used mortgage tables to figure out how much the principal could be to get my desired monthly payment.  It is always an estimate that I know I can expect to be more when taxes and property insurance are figured in.  I like a mortgage payment that forces me to save for both of these annual payments, and the lender pays the bill each year and refigures your next’s years payment.  Then I get pre-approval for the purchase price I’ve selected and tell my real estate agent the range of prices I can look at. I’ve learned you can look at homes slightly above your top price and make an offer lower than the asking price. It totally depends on the market and owner whether or not your offer is accepted.  That’s how I got my current home.  My real estate agent also included a note from me telling the elderly owner how much I appreciated his upkeep of his home and how I wanted to use his home as my residence and not an investment property. My offer was $5,000 less than his asking and he accepted.  

 

Have Your Down Payment 

 

Your down repayment can reduce what you owe, also reducing your costs. Realize, though, that if you put down less than 20% of the cost of your home, you could end up paying private mortgage insurance (PMI).  It is an additional cost to protect the lender when your down payment is less than 20% and you should expect it with special programs that accept a 10% down payment. Nerd Wallet has a down payment calculator which is very helpful.

 

 

Get The Right Real Estate Agent 

 

Once you have determined how much you can really spend and are pre-approved for a mortgage, look for a good real estate agent. Your real estate agent should listen to your wants and needs carefully. They may make recommendations or explain the market to help you find a home that suits your needs and that you can afford.

 

Request A Home Inspection 

 

Once you’ve found the home for you, make sure to get a thorough home inspection. This is different from an appraisal. You should pay for the home inspection.  The home inspector will look for hidden problems with the home before you purchase it.  Through the home inspection, you can learn about any issues that may prevent you from buying the home. This may include mold, termites, foundation problems, or a roof that needs to be replaced. The inspection can save you thousands in repairs later on.  You can request that items are fixed prior to closing or ask for a lower price to cover the problems.

 

 

 

 

Buying a home is an exercise in planning and managing your assets and in working with professionals to meet your goal.  If there are legal questions, I have found a real estate lawyer was a life saver in handling closing issues.  Make a plan, follow the steps, and choose good professionals to assist you. Wishing you a home of your dreams!

 

 

 

 

 

 

 

This is a collaborative post, but all opinons are my own.

 

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Carol

I was raised in Tennessee but have lived in Florida for many years. Love my small home in the Tampa Bay area and its developing garden. My decorating style is eclectic - some vintage, some cottage, all with a modern flair. Pursuing a healthier lifestyle. Spent many years in social services but am happily retired.

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