What are two critical home-buying tips for first-time buyers in 2024? Right now, between the low affordability, high interest rates, and price increases, your expectations and creativity might actually get you a better chance of getting your first home.
Lower Your Expectations
So, it’s your first time buying a home. It’s time to do some reality check and reevaluate which of your “must-haves” you can actually let go. The chance of purchasing a home can depend on your expectation of the house that you want to buy versus the house you need to buy.
Property Size
If you’ve been looking for a home with a certain square footage, you can try going down a size. Say, 2,000 sq. ft. is the size you prefer, but 1,500 sq. ft would be sufficient. Going down the number of rooms can also help. If you’re looking at a 4-bedroom and 2-bath, maybe find a way to work with a 3-bedroom and 2-bath. Maybe even a 3-bedroom and 1-bath.
Property Location
They say it’s all about location. If you search further out from your preferred location, you may just find homes within your budgetary requirements. The drive or commute from your workplace may be further and gas can be more costly, but it’s better than not being able to find a home in the proximity of the area you’re interested in.
Home Condition/Features/Amenities
We’re so used to seeing HGTV homes where everything is pristine. If the kitchen is from 1975, lower your expectations. You can try to save some money down the road to remodel that kitchen. Other examples for features you can compromise on would be the yard size, kitchen size, high ceilings, and number of garages.
Keep these in mind when you start getting into homeownership. It’s better to put your efforts on building your equity, paying down the principal, and stop paying rent. It’s going to save you money in the long run.
Pay More
Are you willing to pay a little bit more than what you see on Zillow? This may happen especially if you’re dealing with a competitive situation. If there are five offers on the table, you may have to actually pay more than what you want to pay.
Everybody’s looking at Zillow and Redfin estimates. That’s why it’s important that your agent pull comparables (comps) and for them to get the fair market value. Paying that fair market value might not get you the house. Find the perfect balance. Your agent might push you to pay a little bit more to get you into homeownership. This topic is actually one of the conversations that I have with my buyers. In 2-5 years down the road, you’ll be able to recoup that overpayment because home prices typically appreciate while you’re paying down the principal (the loan amount excluding the interest).
Be Creative
Multiplexes
If you’ve just been looking at single-family homes, maybe it’s time to look at some duplexes, or even triplexes. The living situation is going to be very different. Yes, single-family homes are nice and you’re the only occupants in the home, but if you share this one wall, it becomes a duplex. With a duplex, you get two units with each unit having its own number of bedrooms and bathrooms. Again, you may have to bring down your expectations from a three-bedroom, two-bath to possibly a two-bedroom, one-bath. I know it’s going to be tight, but it’s going to set you apart significantly in the long run because you’ll be able to get into homeownership much sooner. You can get a tenant and use the rental fee to pay for half of the mortgage payment.
Team Up With Your Friend
I’m starting to see this more and more now. If you have a friend who’s willing to pay to rent out a room in your future home, or maybe even buy a home together, that would be another creative solution.
Things To Watch Out For
Getting Too Creative With Financing
When it comes to financing though, don’t be too creative. Typically, I would recommend 30-year fixed. I just like the safety side of it since banks cannot change your rate once you lock it in. In fact, one of my financial adviser friends said that a 30-year fixed rate mortgage is one of the greatest financial tools that you can use to save money. Variable mortgage rates have pros and cons.
Homes With High Property Taxes and HOA Fees
First-time home buyers normally think about the price, condition, and monthly payment of the property that they tend to overlook the high property taxes and HOA fees. These two fees always go up so that’s going to significantly determine your monthly payment and affordability. So make sure you pay attention to these fees.
Summary
To recap, first-time home buyers should be willing to buy much less than their expectations. Lower your expectations on property size, location, condition, home features/amenities, or price. Another tip would be your creativity in crafting long-term financial solutions. These include expanding your search to duplexes and triplexes and getting a roommate or a tenant.
Time leverage is the critical portion of the long-term real estate strategy for young first time home buyers. These two home buying tips will give you an edge in the current “tight market,” “unaffordable market,” “hard to buy,” “Can’t afford…”
Hopefully these tips will help you raise your chance of buying your first home in 2024.
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