Welcome back to Business & Budgets! I recently shared a bit about my home buying journey on Instagram and I was flooded with questions. This resulted in a Business & Budgets live focused on the subject. This post is a summary of that live with the blueprint of how to get started on your real estate journey. If you are interested in purchasing property for profit, I will share a few tips for new investors at the end of this post. So let's jump right into it, starting with, what's in it for you.
Benefits of Homeownership
You SAVE a ton of money on living expenses in the long run. No matter who you are, you have to pay to live somewhere. If you buy early, your home will be paid off many years before you retire. Allowing you to enjoy your money and do some heavy investing. Check out this post, Saving on Housing Expenses to learn more.
At TAX time you can deduct your mortgage interest and property tax payments, along with other house related expenses from your federal taxable income. Your taxable income is what determines your tax liability, so the lower this number is, the better.
You are in CONTROL of your life, unlike when you have a landlord who can pop-in for property check-ins or tell you that you can’t use nails to hang pictures. You will have the ability to do whatever you want in your castle. This also extends to your land where you can now grow your own food or build your own treehouse.
Are you ready to buy a home?
First, you need to determine how stable you are in regards to income and life balance. A few questions to consider when determining your stability are:
Have you had similar or growing income for at least 3 years?
Have you maintained your current employment at least one year?
Do you have a credit score of at least 620?
Do you have errors or collections on your credit report?
Have you been paying rent for a least a year? At a rate similar to mortgage ($600-$1500)?
First, determine when would you like to move? It will be the first question that your realtor will ask. Consider when your lease is up. Will you have at least $3500 saved by then?
Next, determine how much you can afford. Your bank will help you best determine this number but as a general rule of thumb, multiply your annual income by three.
Thirdly, choose a general area that you would like to live in. Think about schools, transit accessibility and quality of life when reviewing each area. List your top zip codes and cities.
Fourth, select how you will be funding your home. Will you be putting a large lump sum of life savings down? Or will you be using a new homeowners program? If so, which would you like to use and what do you need to do to receive the funding. At this point it may be a good idea to start a spreadsheet.
Last, find realtors in your area of interest and select one that serves your needs. Look them up on their company website, on LinkedIn, etc. How long have they been doing real estate? What do people say about them? Picking a good realtor can make or break the ease of this transaction.
MY BAD REALTOR STORY: The first time I attempted to buy a house was back in 2011. I was 19 years old and Deuce was a baby. At the time me and his dad thought it would be a bright idea to buy a house together, bad move. We were pre-qualified for $60,000 (lol) and hired a realtor. Moral of the story, she sucked and only wanted to show us small and ugly houses. I found a few good options but we decided to end it all before finding a home. Unfortunately, we signed a contract with this lady, a Buyer's Agent Agreement. In this contract it stated that we would only work with this real estate agent and we were actively tied to this contract for 90 days. We were about 45 days in and we had two options, ride it out or end it immediately. She ended up charging us a $500 Finder Fee -____- never again. *My 2016 realtor was amazing and we never had to sign some "exclusivity contract," if you are seeking a Atlanta based real estate agent check out Lisa Navarro.
First, you are going to get pre-qualified. Whether you are going about the process independently or going through a program you will get pre-qualified very early on. If you do go through a first time home buyer program you may be required to take a course on home-buying and financial literacy before moving on to to pre-qual. Pre-qualified means that you have given your information to the bank and based on this information they have given you an amount and interest rate that they believe you will be approved for. This is what your realtor uses to make sure you are looking