The thought of buying a house right now may leave you feeling a bit deflated, but it can become a reality. If you’re expecting to buy a remodeled, 2-story house with a 3-car garage for an affordable price in today’s housing market, you may need to adjust your expectations. I recently listened to Dave Ramsey, a financial guru, talk about the housing market, and I thought I would share some of his wisdom. He has a knack for putting the housing market into perspective, like how we think we should buy a large dream house when, in reality, a smaller, more affordable house may make more sense. Let’s look at how adjusting our perspective can help us buy a house now and start earning equity.
Many of us have been told that we must save 20% as a down payment to purchase a home. That’s simply not true. If you don’t have 20% for the down payment, you’ll have to pay for Private Mortgage Insurance (PMI), typically $75/month for every $100,000 you borrow. PMI protects your lender if you default on your mortgage and your home goes into foreclosure. Keep in mind that some mortgages don’t require a down payment (ex. VA Loan), and grants and down payment assistance programs are available.
House Prices May Not Go Lower
If you’re waiting to buy a house because you think housing prices will drop, you may have to wait forever. Real estate history reveals that there have only been a couple of temporary price drops in the last 80+ years, then prices went back up. The good news -- the rate at which home prices are growing will start to slow, according to experts.
My Dream Home or Just Enough
Finding everything you dream of in a new home might not be a reality right now. For example, consider a small home or a fixer-upper instead of focusing on a 3-bedroom, 2-bathroom, 2400-square-foot home. If you have 2 small children, they can share a room so that a 2-bedroom house would suffice. You can always move into a larger house in 5 years when the kids get bigger and need more space. Comprising on house size will help you move away from renting and into owning a house where you’ll earn equity.
- A small home is easier to keep clean
- A small yard requires less work
- Buy a house now and start earning equity
Mortgage rates may seem high, but imagine paying 20% in mortgage interest as my parents did back in the day. 6% interest on a home doesn’t sound bad, does it?
Adjusting your mindset is vital in today’s housing market. Forget the big dream house for now. Focus on getting into a “just big enough” house that can serve you for the next 5+ years. Your goal? To start earning equity and stop throwing away your money as a renter. Talk to your mortgage lender to see how much of a mortgage you can get. Your real estate agent can help you find a home that fits your budget, and you can slowly remodel it and optimally sell for a profit in the long run. Need help finding a local real estate agent? Contact us at firstname.lastname@example.org.