Home buyers today face high hurdles. Housing prices are soaring, our money is losing it's power, rent is more expensive than every before, Covid-19, the elite's are bleeding the world for profit, our favorite sandwich place upped their prices by a dollar across the board-- everything is holding on by a thread.
How are people today making such a large purchase despite the obstacles? With flexibility and creative money moves.
Have Options (and Good Credit)
Step one is all the financial stuff. You have to know what your financing options are, and your credit plays a critical role in this. You'll also have to know how much you can put down upfront, and how much is worth putting down, so as to not tie up funds that would work better elsewhere.
The better your credit, and the more you could possibly put down, the better your chances are at securing a great loan.
Research what types of financing you're capable of at the moment, and find your favorite options. Explore them thoroughly and it will save you a lot of-- know what, scratch that. It will save you. If you choose to do this on your own, you'll thank yourself for putting this work in up front.
Most people think 20% down is the minimum, but it's only the standard and, frankly, it's not standard. There are so many options out there that you can put anywhere between 0%-100%, you'll just have to explore your options.
Remember, the standard is that your mortgage payment shouldn't cost more than 30% of your income. Even that much is seriously, seriously excessive, but it's not unreasonable.
Save Money by Default
Younger generations have much less wealth than their older counterparts, and wealth distribution in America is impeccably skewed. It's the worst we've ever seen.
Research shows that "renter households typically earn a median income of $37,500 annually, which is nearly $40,000 less than the median household income netted by households who recently bought a home."
$37,500 is not a reasonable income to purchase a home in almost any market. If you know how to play Robinhood well, maybe, but risky all the same. That's why we say save by default.
Only spend what you have to, or less. Save all the money you can. Multiply that money, then repeat, and repeat until you reach a tax bracket you like, then feel free to pick at it. Still, as the late mogul, Nipsey Hussle, said, "Go all in."
The more money you have to invest, or the bigger one number is in a multiplication problem, the bigger your payout. If you have the patience to hold off on the toys you want, it pays off. Imagine trying to make $50k with $100k to your name. Then imagine trying to make $50k with $200k to your name? Much easier. The rich get richer for a reason.
You don't need as much saved as you think
Two thirds of renters say that down payments are the biggest barrier to entry when it comes to buying a home.
With a traditional down payment, the average up-front cost of buying a home in the U.S. is $10k more than that $37,500, so we have to save about 125% of the money we make in one year. Easy.
The thing is: 20% is the standard, but is not required-- like pants. We could technically walk about in our underwear, but we have to consider the implications. Paying less than 20% means additional considerations, however, more than half of recent buyers put down less.
(It's worth considering, whether it's dad or daddy, 34% of buyers get help on their down payments.)
Have standards and an open mind
Another way to secure a place is to allow for flexibility. Whatever your criteria, entertain other possibilities. Aristotle says its a mark of intelligence to entertain ideas without necessarily embracing them. Stay open to your options, try to have no expectations, and the results will surprise you.
Location is probably the most critical factor in a home's price. That's why you'll find titanic properties for cheap; they're in the middle of nowhere, like in Knives Out (which features a gorgeous Victorian home in the sticks of Massachusetts.) What would cost millions in Weston costs a few dollars in one of those abandoned neighborhoods from The Goldfinch (the book, not the movie.)
Commutes are a factor, as well as what kind of life you want to lead, but keep an open mind and consider your options. If you just want to get to work in decent time, maybe find a place along the right subway line. If you're more interested in the full city experience, scoop up a condo somewhere like Seaport or Back Bay and live your best life.
You can make magic happen in buying a home. It's important to understand what's necessary, and what you can put off. Sure, that private elevator condo isn't within your price range yet, or maybe a place on a higher floor costs more, but you don't have to settle for less. You'll just have to get something else for now while you stack money and exercise patience.