Can I Buy a Home?
This month, in wondering about what might be interesting to readers, I asked a young man what he would like to hear about in real estate matters? His response was, "I can't see myself ever owning a home, especially if I do become a teacher." Having spent time getting 3 of my 4 married, adult children (who have varying income and assets) into homes, I will be the first to admit it isn't always easy, and most of the time it is difficult. However, the most important factor to consider is that the sooner you buy real estate, the more feasible it is.
If you are short on funds, why struggle to do it? Because few of us can save at the rate of inflation, and the beauty of home ownership is we get the benefit of the appreciation on the whole value, rather than just appreciation on the amount of our down payment monies. Here is an example of the difference between leaving money in the bank and buying a piece of property for one year:
- $20,000.00 into bank @ 2% interest = $400.00
- $20,000.00 used as a down payment on a $400,000.00 home or condo = $8,000.00 in equity*
(*This assumes an appreciation in real estate values of 2% annually)
The example I used above is with a 5% down. There are 3% down loans, 'first-time buyer' loans with special rates or percentages available from time to time. Some companies or associations, like teachers, have special assistance programs as well.
One of the biggest deterrents to many people starting out to buy property involves the emotions and desire to find the perfect property, or a particularly desirable type of property. I often hear "I'd never live in a condo" or "I will only live on a large lot", etc., etc. Subject to buying the best location possible for your dollar, understand that taking a first imperfect step may be what allows you, in step 2 or 3, to buy what you really desire in the long run.
Even if you live in a wonderful rented house, don't want to move and wouldn’t live in a condo, you can buy a condo, rent it out, and have the advantage of not just your equity, but it’s entire value growing. Another option for people starting out is to buy property and rent out a room to help offset, or keep mortgage costs lower. If you don’t qualify individually for the loan, buy with a friend, sibling or even a parent. Often a parent can use the tax write off of having an investment property and you both win.
The cautionary note in this approach is no matter whom you buy in partnership with, the agreements, even between relatives, should be in writing. Include matters such as how long you will hold the property for, what parameters you agree to use if one partner wants to buy the other out. These and/or any other areas of concern are much easier to agree on before purchasing, rather than when your lives or interests have gone different directions, or a dissenting sibling after a parent passes away.
Keep your credit spotless, or if it’s not, make a plan and clean it up. Meet with a mortgage broker, discover what is a realistic price range for you and make your plan to become a home owner.