How to buy a house or apartment: 10 foolproof steps to get your dream home on a budget

By Gina Ragusa | Mic

If you’re ready to buy a home to call your own, you’re not alone: The United States housing market is red hot right now, with prices rising fast and demand outstripping supply. Stiff competition makes it tough to find a spot you both love and can afford.

Some good news? There are lots of ways to save, if you’re determined and think outside the box: You could Airbnb out a room or basement unit to help cover mortgage payments, for example, or put solar panels on your home and sell harnessed energy back to the grid. You might even be eligible for loans with low or zero down payments and not know it (more on that below).

Besides, your vision of a “dream home” can end up evolving — in a helpful way — during your search. Hospital clinical service representative Leslie Lessnau and her husband Tim initially set out to buy a house in March 2017, but eventually bought a condo in October in Novi, Michigan. The couple looked at 18 homes, seeking a big yard and garage. But during the hunt they realized they could have their “must haves” without the hassles of yard work and shoveling snow. “A bigger yard and larger garage would have been nice, but we are not disappointed in our decision,” she told Mic in an email.

Starting sooner rather than later is smart, as interest rates and prices are only going up. “Home values over the past year appreciated 6.7%,” said senior economist at Zillow Skylar Olsen. While this may have you worried about a bubble popping after you buy, experts say it doesn’t look like 2007: Unlike in the lead-up to the financial crisis, as lenders handed out risky adjustable rate mortgages like candy, prices are rising today for different reasons.

“The rise in value this time is due to low inventory and the competition to purchase a home,” Olsen said. You can expect prices to jump again in 2018, although at a more moderate pace. Zillow predicts values will increase 3.2% this year, while the National Association of Realtors expects a 5.5% price bump. In the hottest markets, it’s not uncommon for buyers to place two or more bids on homes before having their bid accepted, Olsen said.

Mortgage rates are also expected to rise from about 4% in 2017 to 5% by midyear 2018, as the Federal Reserve raises rates, the Mortgage Bankers Association reported. So be ready to pounce — while simultaneously exercising patience: “The most surprising aspect of buying a home was the waiting game,” Lessnau said. “Waiting to see if your offer was accepted then waiting for the home inspection to go through and then wondering if the mortgage will be approved.”

And don’t feel too stressed if you can’t find your perfect home right away. Despite the hot market, increased inventory levels should help counteract rising prices, especially among high-end homes, Realtor.com projects. With all that in mind, how do you actually go from renter to happy homeowner? It’s not so tough when you break it down: Here are 10 simple steps to follow.

1. Start with a reality check

Why do you want to become a homeowner? This is likely to be the biggest purchase of your life — so go into it with eyes wide open. Ask the hard questions like: Do I have enough money to buy, is now a good time in my life to buy, and am I really ready to settle down?

If you simply want to buy a home as an “investment,” think twice: Home values don’t actually rise much faster than inflation, meaning you’re not getting a great return on your money. In comparison, stocks rose about 5% annually, from 1966 to 2015, adjusted for inflation. And while popular wisdom holds that it’s smarter to own than to rent (since you’re effectively throwing rent money away) much of your cash in the first few years of buying a house goes to paying off interest: It actually takes about 10 years for your home to have enough value to start recouping your purchase costs.

So, to figure out whether it makes sense for you rent or own, run the numbers on renting versus owning using a calculator like this one. In the end, buying a home is a lifestyle choice more than anything else. If you like the idea of living long-term in a tight-knit community, having a space that’s all yours or simply never having to deal with a landlord again, then it may make sense.

To start, identify priorities you need in a new home, “such as living in a certain neighborhood or a particular kitchen style,” Olsen said. Decide on basics like how many bedrooms or parking spots you need before moving onto “wants” like a stone fireplace or big backyard for outdoor entertaining. Be prepared to make compromises. “Maybe you can find a home in the area you want, but the homes you can afford don’t include your dream kitchen,” she added.

Next, crunch the numbers to see what you can afford. The typical homebuyer needs a 20% down payment, or $41,000 on the median home price of $205,100 in 2017. While there are low or even no-down-payment options, including FHAVA and USDA loans, you still need to earn enough money to qualify for the mortgage and to be able to cover your anticipated monthly costs. Whatever you do, try to stay both confident and realistic.

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