Given the current social climate, the idea of buying a home may be daunting, but it’s not impossible. Despite climbing home prices, the uncertainty of the COVID-19 pandemic and the debt facing many potential buyers, there are options that could tilt the scale in your favor.
1. Determine your budget
Prior to buying a home, you’ll need to determine your budget and how much money you’ll need for the down payment. Though 20% down comes with benefits, it’s not the only option. In fact, fewer than half of homebuyers follow this guideline, according to a Zillow study. But if you’re able, that 20% means lower monthly payments, no need for mortgage insurance and a potentially lower interest rate.
It’s generally recommended to keep your monthly payments at or below 30% of your household income. If you end up putting down less than 20%, it’s important to make sure you’re not left with a monthly payment you can’t afford.
2. Think outside the box
Buying a house can be fraught with unanticipated expenses. “There is a lack of transparency in real estate transactions and there are fees that buyers and sellers don’t understand,” said Mike Peregrina, founder of real estate company Homie. “When they do come to understand them, it’s often too late because they’re already at the closing table. At Homie, we don’t charge high commissions when you buy or sell, so the consumer has a better idea of what they’re spending.”
Having a firm understanding of the process is vital for first-time homebuyers. Be sure your real estate agent and loan officer give you a clear understanding of the costs you’ll be on the hook for early in the process. “Homie’s mission is savings, simplicity, service and social good. That transparency is necessary for us,” Peregrina said.
3. Look for programs and offers for first-time buyers
There are a number of federal and state programs that offer first-time buyer assistance and grants. Private companies, such as Homie, may offer incentives as well, such as refunding up to $5,000 back to homebuyers. “About 60% of our buyers are first time homebuyers,” Peregrina said. “You don’t have to dip into your savings, and you can still get your dream home.” Peregrina also notes that Homie offers a competitive advantage by allowing customers to book a tour immediately online to see the home more quickly than other companies and agents.
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