Typically, we leave college and we know we should probably purchase a home, but we have no idea how. It’s pretty standard for people to come in to a bank with their arms in the air. If this is feels like you, you are not alone. There really should be a college course on how to buy and sell the important things in your life, or a course on “adulting.”
You can buy a house that is not on the MLS
It seems like there is only one place to find a house for sale, and that is on the MLS (multiple listing service). You search and search, and may fall short, or you may be in luck and find something that you really love right away. The real estate market fluctuates between seller’s and buyer’s markets all the time.
The MLS is not the only place you can go to find houses for sale. You could ask your best friend’s neighbor if they are interested in selling their house, and buy it from them the next day. It may seem strange to simply ask someone if they are interested in selling, but think about it this way: if someone asked you if your house is for sale, you may say “no,” but I bet you contemplate about it later. Everything is for sale, sometimes you just have to ask to find out.
For sale by owner happens often as well. These days you can find those deals on realtor.com or zillow.com and find different pictures and a selling price. Just search “For sale by owner in your town” and you will find sites and homes.
The benefit to buying a house not on the MLS is that you save the seller the typical 6% realtor fee, therefore you are able to offer 6% less and justify why. Boom! Don’t get me wrong, real estate agents will do SO MUCH for you, and having one feels comforting… especially when buying your first property.
You can offer lower than what the asking price is
Typically the seller will account for additional carrying costs (realtor fees, appraisals, inspections, and sometimes closing costs) when the house is sold. A seller rarely lists their house for a low price to start out with. So, if you have a good reason, (typically that you can’t afford the asking price) then offer a lower price- you never know what the seller is going to say until it happens. At that point, the seller usually comes back with a counteroffer (an offer that is somewhere in between the two offers).
You can shop banks; search for the BEST interest rate
The FED (Federal Reserve Board) cuts and increases interest rates all the time. Therefore, the percent in interest you pay on your house can go up and down. Banks give interest rates to home buyers, and they can also fluctuate. Sometimes that difference can mean an additional $100 a month on your mortgage payment. It’s really important to ask around and see what the going interest rate is on your home that you are buying. Right now, as of June 2019, the interest rates are looking pretty good (around 4.25-4.5%).
Example amortization schedule:
July 2019 Payment 1: $836 Principal: $217 Interest: $618
Aug 2019 Payment 2: $836 Principal: $218 Interest: $617
Therefore, each month you are paying the bank around $600 per month to loan you the money to buy your house. SIX HUNDRED DOLLARS!! Shop wisely.
Buy a house within your means; live conservatively
It is so much better to live in a less expensive house, and make it your own, than it is to buy something that you are going to be suffering to pay each month. Make sure to calculate your finances and decide how much of a mortgage payment you can afford each month before you shop for houses. Trust me, if you wait until later, you will already have your eye on that $500,000 house down the street. Just because the bank will approve you to buy something that is a lot more than you initially thought, doesn’t mean you should spend it all.
Your payments should equate to somewhere around 30% of your total income. The extra money you save with a smaller mortgage, put it in an IRA: take care of your future self.
What about you, do you have any first time homebuyer stories that will help us learn?
Creating opportunities for financial freedom 