If buying a home is on your to-do list, you’re not alone: Eighty-three percent of young people still believe homeownership is part of the American Dream, and 78 percent believe they can achieve it.
But while exciting, the process of purchasing a first home is fraught with potential pitfalls—some costlier than others.
Here, Alison Rogers, a licensed broker at Upstairs Realty in N.Y., weighs in on some of the highs and lows of five first-time home buyers’ experiences. From hidden home-repair nightmares to the benefits of putting down more than 20 percent, you may want to read this before you start house hunting.
The All-Star Savers
Tanner, 32, and Ashley Callais, 33, a travel site owner and interior design assistant in Austin, Texas
“We bought our first home—a three-bedroom in Austin—last March for about $300,000. We’d been longtime renters, but learning our first baby was on the way lit a fire under us to put down roots.
We each had a healthy savings account when we got married in 2012. Since then, we’ve been all-star savers. There have been periods where we’ve saved 70 percent of our low-six-figure (combined) income—thanks to avoiding debt and sticking with a strict budget. (Even after my career took off, I drove the same old Saturn from college so we could save more.) This helped us put down 30 percent on our new home.
Our monthly payment now lands at $1,400 including taxes, compared to $1,050 in rent for a much smaller place. It’s also way nicer than our old digs and in the heart of an up-and-coming neighborhood.
My one regret is not being more aggressive with bidding. Austin is a very competitive housing market; it isn’t uncommon for properties in our price range to go under contract within days. We actually lost several houses we really liked because we weren’t comfortable bidding more than asking price, which ended up lengthening our house hunt by several months.”
Expert insights
“Tanner and Ashley did a lot right—particularly putting down such a hefty down payment. Doing so lowers your mortgage payments, which means you’ll have more available income for unexpected expenses.
When it comes to bidding, I’d tell stressed-out house hunters to repeat this mantra: ‘It’s ok to lose a house; there’s always another.’ You don’t want to get so caught up in the bidding that you drive yourself to a number you regret. I suggest researching what similar houses are going for in the area, then looking at your budget and determining your top number. This gives you a built-in boundary.”
The Passive-Income Seeker
Jake Rheude, 25, director of business development at an ecommerce fulfillment company in Knoxville, Tenn.
“I bought a $170,000 three-bedroom townhouse in Knoxville last year after socking away enough money over nine years—from gifts, income from after-school jobs in high school and a $4,000 loan from my dad—to cover a 10-percent down payment.
Because I didn’t put down 20 percent, I’m on the hook for PMI (private mortgage insurance), which is $49 a month for two years. Still, I consider it a great investment. My monthly payment is $950 including taxes and insurance, which is probably $400 less than what I’d pay to rent a comparable property.
I’m particularly attracted to the home’s rental potential. I’m a single guy and enjoy living in Knoxville, but don’t know what the future holds. If I move one day, I’m confident I’ll be able to rent it out to college students who live in the area.
It feels good to have a future passive income stream in the pipeline. Adding a rental property to my portfolio will be a huge asset in the long run.”
Expert insights
“Putting down 20 percent is the rule of thumb because it gives you a cushion should you have to sell into a market that’s since declined. It also lowers your monthly payment and means you don’t need additional insurance. So putting down less than that makes maintaining a solid emergency fund all the more important, should disaster strike. You’ll also want enough wiggle room in your budget to afford all related housing costs (think: taxes, insurance, maintenance, HOA fees and the like).
As for renting it out, my biggest advice as a longtime landlord is to remember that you’re likely going to have vacancies in between tenants—even in active renters markets. Build this into your budget so you aren’t blindsided by dry periods. Also, depending on how far away you live, it might make sense to hire a property manager to help with maintenance and repairs.”
The Unsuspecting Fixer-Uppers
Yenni, 29, and Jonathan Desroches, 29, pet care company owner and a senior hardware engineer in Worcester, Mass.
“Jonathan and I were thrilled when we put down 10 percent and bought our three-family home in August 2013 for $295,000. We live in one unit and rent the other two for $2,400 per month, which covers our entire mortgage, taxes and insurance.
The house is now valued at $335,000—a nice uptick in just a few years—but there’s a huge downside: Post-sale, we found over $125,000 in necessary repairs, from mold to structural issues to water damage and more—all of which our inspector should have noted. We’ve leaned on our savings and a mix of family gifts and loans to cover $90,000 so far.
We also discovered during the sale that our seller’s agent happened to be our buyer’s agent’s boss and fiancé. (Hello, conflict of interest!) Plus our mortgage broker forgot to submit our rate-lock forms, which bumped our interest rate up from 3.25 percent to 4.25 percent.
In a nutshell, it’s been a nightmare. If we could go back in time, we’d do way more research and definitely hire a more qualified inspector.”
Expert insights
“As Yenni well knows, it’s really important to find a trusted inspector. I recommend going with someone who belongs to the International Association of Certified Home Inspectors because they’ve taken a certification exam and adhere to a standardized code of ethics. Her situation also drives home the potential pitfalls of putting down less than 10 percent; without a fully loaded emergency fund, big-ticket home repairs can be a huge financial burden.
Also, the relationship between the buyer’s and seller’s agent should have been disclosed to her in writing, and is in clear violation of Massachusetts’s disclosure laws regarding dual agency. At the very least, it sounds like she wasn’t treated with proper care, but I’ll leave it to a Massachusetts attorney to say whether she has any financial recourse.”
This post originally appeared on Grow
Related:
This May Be the Smartest Thing You Do With Your Wedding Gift Cash
How I Survived Unemployment Without Touching My Emergency Fund
What I Gained From Giving Up 50 Percent of My Income
The post 5 First-Time Home Buyers Share the Good -and the Bad appeared first on Money Peach.
5 First-Time Home Buyers Share the Good -and the Bad posted first on cashforcarsperthblog.blogspot.com
No comments:
Post a Comment