Buy Your First Home Before You Can Afford It
Posted by Barry Lynn Miller on Monday, August 2nd, 2010 at 8:38pm.Buying a home is the biggest (especially at a young age) and often the best investment that you will ever make. Why not make that investment now rather than later? I will be trying to explain the differences between know and later. I will not be addressing the fact that home prices are way down so do keep that in mind.
If you plans are saving up with a goal of getting your new home within the next 2 to 5 years, the following ideas may help you buy your home sooner than you had planned. I would be glad to provide the math but on a $200k property you would have a difference of $88k in equity and cash verse taken 48 months to save for your down payment. NOTE THERE ARE MANY NO DOWN PAYMENT LOANS
* Buy from a motivated or distressed seller. A motivated seller is a property owner who has a house he or she wants to get rid of quickly. It could be that the owner was unable to sell the house in a timly manner on his or her own or that, even though the house was listed through a real estate agent, it just didn't sell due to current marketing conditions. Only about 5 percent to 10 percent of sellers are truly motivated, you may need to relax your must-have requirements in a house and settle for a home you can fix up or remodel. The seller might also be facing foreclosure and its better to sale for less rather than let it go back to bank or they are sometimes able to do a short sale which is "the lender take less then the amount owed"
* You can sometimes find a seller who doesn't need cash upfront. Most of the time sellers will need the money from the sale of their home to buy their next home. Instead, look for someone who has already bought his or her next house and are currently paying two mortgages. Vacant properties or homes that have been rental properties also are good candidates. By looking for properties like these, you'll be working with sellers who are more likely to wait to get their home sold and are more likly to take a lose.
* You can sometimes structure your offer as a lease purchase. Instead of buying right away, offer to rent the home for 1 or 2 years at a set rate. This will help the owner cover the current mortgage of the property while giving you the ability to live in your home now, you then would continue to save for the down payment or enroll in a reputable credit repair program and then buy the home when you are ready. Make sure your contract has the option to buy the home at or below today's value. If the seller is not willing to go along with this, then look for someone who is more motivated to sell or make sure the property is a desirable place that anyone would buy. Common mistake is buying a property simple because you found terms you could afford this would put you in a property that might be hard for you to sale at a later date as well.
* There are other programs available as well such as contract for deed, Wrap around mortgage, hard money loans, and special government programs. If you have any questions about other programs like this give me call or send an e-mail.
Try and see if you can get the seller to give you a credit towards the purchase of the home for each month that you pay rent. Say $100-$200 per month I like to negotiate the credit based off a standard amortization schedule of say 6.5%-7.5%.
Using these ideas, you'll be able to buy that special house this year rather than waiting another two years or more. If the home you get is worth $200,000 today, then at a 10 percent appreciation rate, you could make an extra $40,000 or more simply by getting into the real estate market years ahead of schedule.
To sum it up
Purchasing a home is most likely the biggest and often the best investment that you will ever make. Why not make that investment now?
Sincerly Yours
Keller Williams Trussville
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