First Time Home Buyers - How to Find a Great House for a Price You Can Afford
Updated: Jan 23, 2020
In today’s economy, more and more first time home buyers are being priced out of the market. The good news is that, although house prices are predicted to continue rising, that rise is starting to slow down, giving new hope to young millennials who had just about given up.
But don’t get too excited yet. Although housing prices aren’t rising as fast as they were, they are still rising in a market where buying a home is already a challenge for many. So it’s best to learn everything you can about how to buy your first home in a market like this.
5 Tips to Help You Get Ahead of the Home Buying Game
1. Get Prepared.
There are several ways to prepare for buying your first home and they are all important:
Start saving up for a down payment. Offers with cash down payments are more likely to be accepted. Also check out First Time Home Buyer Programs like USDA, Fannie Mae, Freddie Mac, VA and Credit Unions. You’ll likely be able to pay a lot less than 20% down, sometimes as low as 3 – 6%.
Fix any issues on your credit history. Follow expert suggestions on how to have the highest credit scores.
Be practical about how much house you can afford. Try this Home Affordability Calculator.
Do your research ahead of time to know exactly what kind of house you want.
Get pre-qualified for a mortgage loan so that when you find a great house you can make an offer fast.
2. Consider Buying a Non-Traditional Home.
Buy a small land lot and build an A-Frame Kit House. They’re nice looking, super inexpensive and easy to build yourself.
Buy a fixer upper at a low enough price that the instant equity wipes out a down payment. We recently found a motivated seller in a for-sale-by-owner ad. She was about to be foreclosed on and willing to take what she owed for the house, which was $142,000. Her house was worth $180,000 as is. It cost about $50,000 to fix it up. The After Repair Value (ARV) was $265,000.
If you found a house like that, you could not only get into it with nothing down, but you could also end up with some great equity after fixing it up. These are techniques investors use to find houses they can flip for a profit.
But first time home buyers can use these techniques too. If this sounds appealing to you, learn all that you can about how to find motivated sellers and remodel fixer uppers.
3. Consider traveling to a more affordable area. More and more young home buyers are opting to move to an area where houses are more affordable. If you’re the adventurous type, this may be the answer for you.
4. Do Your Due Diligence. Once you find your dream home, research it thoroughly for an accurate home value before making an offer. This step is critical to win out over the competition. If your offer is too low, the Seller won’t consider your offer. And, of course you don’t want to end up paying more than the property is worth.
Make sure to enlist the help of a good Realtor for help with this step. A great agent who knows all about the neighborhood market can help you decide on the perfect offer amount for the best chances of acceptance.
5. Get a Home Inspection. In your offer, include an inspection period. Once your offer is accepted, get that inspection done before the end of the inspection period. If the inspection reveals any major issues that affect the property value, you can use those findings to adjust your offer or back out of the deal.