In conversations with young people, the idea of buying a home seems like a pipe dream and many give up on the idea and just focus on enjoying their present lives with shopping, travel and eating out. The cost of goods and services are certainly influencing ability to pay and current housing prices across California have not helped. Here are some of the top reasons why they don't think they can buy:
Mortgage would be higher than rent
Not earning enough for mortgage payment
Not enough money for a down payment and closing costs
Not knowing how to start the process
Not knowing someone to help with the process
Not having established credit history
All these things are true but I always say......where there is a will there is a way.
With interest rates at historic lows (around 3.1-3.7%) money is cheap and you might be surprised at how much you can really afford and rental prices may be higher than your mortgage payment (depending on loan amount and location). In 1981, interest rates on average climbed to 16.63% so although housing prices were much less, borrowing money was VERY expensive. In 2000 average rates went from 8.0% down to around 5%. It's a great time to get a loan!
Cutting back on daily Starbucks coffees, dining out and take out might go a long way in helping you save for a down payment. Delivery fees, tips, restaurant priced wine and beverages can all add up to a hefty bill
If you don't have family who can provide you with a down payment, check with a lender and see if there are special first time home buyer programs that might work for you. Some will accept as low as 3% down but if you don't ask, you'll never know
Be conscientious about your credit. Talk to a lender about ways to improve your credit score. Consolidate debt, don't open additional revolving credit lines, increase payments on credit cards and make debt reduction a focus!
Lower your expectations for the "home of your dreams". Don't expect remodeled home, large kitchen, pool and 2 car garage when you are first starting out. You may have to compromise by bringing on additional renters, doing some of your own home improvements or living in a location that isn't your first choice. As your first investment appreciates, you can start moving towards a larger home, nicer locations and more amenities. Patience is the key!
Ignorance is often our excuse so sitting down with a real estate agent and a lender are the first steps to educating yourself. Once you know what you need to do, set a budget, can a plan and start working towards that home ownership goal. You might be surprised at how fast you can do it!