Do you watch people your age (or even younger) investing in Real Estate and building equity, while you are stuck paying someone else's mortgage? Do you ever wonder, how they are doing it?! Welcome to my first blog post! Read along to learn some concrete steps you can take to get you closer to owning your first home!
Benefits of buying instead of renting
I am not oblivious to the fact that their are some benefits to renting rather than buying. For example; there is more flexibility to pick up and move, there is need to worry about maintenance, and well, it is just an easier process. However, in my humble opinion, those benefits are far outweighed by the following benefits of buying a home:
1. Building equity
Did you know that an estimated 90% of all millionaires made their wealth through Real Estate
(Andrew Carnegie). It is often said that the average house will appreciate roughly 3%-5% every year, which
is a fairly safe and modest growth. However, that is just the average growth. Somewhere like the
Gallatin Valley that is booming with growth has experienced a 13.5% increase in the median
home price in just the last year! (Rocket Homes). Buying a home is not just buying a place to live, it is
seriously a great investment.
2. No worrying about raised rents
If you or someone you know has had their rent raised above what they were able to pay, you can
understand the stress it can cause. In markets with high demand (like Bozeman MT) raised
rents are inevitable, so instead of worrying about what your rent will cost you next year, get locked
into a mortgage that will be the same payment now as it is in 20 years!
3. Deducting mortgage interest on your taxes
The last financial reason to buy a house is that the money that you pay to interest every year can
be a significant tax deduction! Mortgage interest is 100% tax deductible for the interest you pay on the first
$750,000 of your mortgage debt.
4. More freedom and fewer restrictions
Now less about numbers and more about lifestyle. My favorite part about buying a home so far is
the amount of freedom we experience. I don't have to worry about mounting my TV on the wall,
or having people over too late. Owning a home means less restrictions and the ability to live
life freely. *Just make sure you get along with your neighbors ;)
5. Making yourself at home
This might not be the case for other people, but when I was renting I always felt unsettled. I
didn't allow myself to feel "at home" because I knew that at any point I might move somewhere
else. Having you own house means feeling settled in a place you can make your home.
"Easier said than done"
Of course, what many of you might be thinking is 'duh owning a home is better than renting but that is easier said than done!' Which is valid, but here are some of the tips I have for you after just buying a home in June of this year!
1. Make sure you have a solid credit score!
Credit is not something you can ignore in 2023. If you don't have a credit history and aren't
thinking about how to build one, wake up and join the 21st century! There are plenty of
resources out there for how to build a credit history, so by all means Google it. But what worked
great for me was getting a credit card and paying it off in full each month. I was surprised just
how fast my credit grew. If you took out student loans to go to college, good news! Those
payments will also boost your credit. Lastly, if you are planning to buy a car, consider financing
even a small amount of it! Make your payments on time and watch your credit soar!!
2. Save for a downpayment
Of course, one of the most obvious (and daunting) steps to buying a home is saving for a downpayment.
Something that is not so obvious is to save for closing costs as well, which can be significant (as much as
3%-6%) of the loan. The good news is that first time home buyers have numerous programs to
help with downpayment cost. As a recent first time home buyer myself, our downpayment was
only 3.5% of our loan.
3. Be realistic about what you are looking for
Let's get real, your first home is likely not going to be a brand new home with real hardwood
floors, marble tile in the master bathroom, and a giant kitchen island. Sit down and write a list of
the things that really matter (bonus points if they are things that actually make the house more
valuable). If the house doesn't have your dream kitchen, that's okay! Home projects are fun! Plus,
many first time home buyers choose a fixer upper to maximize their return on investment.
4. Find a realtor who knows what the heck they are doing
My next biggest tip is to find a Realtor that is reputable and you trust. It is surprisingly easy to buy a house
without doing any due diligence on it, leaving you in a mess of problems. A Realtor is not
just someone who does paperwork for you and takes a commission. They are there to go to battle
for you and make sure no issues; physical, legal, or otherwise come back to haunt you down the
road.
5. Find a local lender who you trust
Nearly as important as a Realtor you trust is a Lender you trust. Especially if this is your first time buying a
home. You want a Lender who will weigh all the loan options, find what will work best for you and do
everything in their power to make sure you get approved! My advice is always to consider a local Lender who
you can meet with in person, and is willing to answer any questions you have.
6. Be ready to stay in your home for quite a few years
House values don't go up overnight, in fact sometimes they go down before they go up. Don't let
that scare you! For many years Real Estate has been one of the most sound investments a person
can make. So hunker down and know that in 5 or 10 years your house will have appreciated,
maybe even more than you could have ever imagined!
Thanks for reading!
I thoroughly enjoyed writing this blog and can't wait to share more of my thoughts on this subject, and others! If you suddenly have had an epiphany and have decided it is time to buy your first home, please reach out! I would love to answer any questions and/or be a guide during such an exciting time!!
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