Over the past few years I’ve scoped Trulia and Zillows real estate listings in my bustling metropolis (and suburban sprawl) in hopes of owning my own place. Every time I thought I’d save enough for that golden 20% down payment, the prices of homes out-paced that. As I encroach on my mid-thirties I find myself wondering if I’ll ever afford a home. Add in the fact that our family planning projects some new additions in a couple years, that wonder has turned into despair and fear. It has also turned into a swift kick to the keister to get serious about home buying.
I’ve been on a research rampage lately, and I’ve come to a couple conclusions after consulting a wide variety of current home owners, future movers, and the never-ending rants of the Internet.
Don’t rush into buying a home just because baby is on the way.
So apparently newborn to 12-month infants are not very mobile. Shocker. So why rush into a home for “more space for your growing family?” There are benefits to getting a new home before a baby arrival, but it also adds yet another life-changing stress. From parents I’ve spoken to, they left their cozy 1 bedroom rent-controlled apartments for either larger condos or small homes paying upwards of a thousand dollars more per month in mortgage. So what did that $1,000 get them. An extra room to decorate but wasn’t used for almost a year because they ended up moving the crib into their bedroom or co-sleeping. They also got a fine school district… that wouldn’t come into play for another four years. So before you up-end your life for the arrival of your little peanut, figure out if you need to rush through it. In my case, I also have a rent-controlled apartment that is convenient to both grocery stores and doctors. I definitely cannot raise a toddler in the tiny studio, but I have room for an infant and save way more money renting and investing what money would have gone to a mortgage payment. It isn’t for everyone, but it is definitely something to consider.
It really is location, location, location.
Yes location dictates a lot about the businesses, weather, and neighbors you’re buying into. It is insane how moving 2 blocks one way or another can raise a homes value by tens of thousands. My college friend bought a 3-bedroom home in a great school district and quiet neighborhood. His neighbor to the back, and across the school district lines, with the exact same 3-bedroom layout paid $35,000 LESS. I believe the high schools between the two districts were an 8 versus a 5 on Zillows. It seems so arbitrary but it is a reality. Location matters. So how does one try to find something in their price range in their ideal location? Figure out what really matters and find out the truth. In this case, school rankings are used as an indicator for much more. Besides an education for your child, it includes the friendliness and involvement of your neighbors and the crime associated with your area. That may not be the case. Once you’ve narrowed down your search to select areas, pound the pavement and really get to know the neighborhood. Walk down the street in the morning and when folks return home from work. Check out the school and how is it ranked. Are they using subjective student/parent feedback? State aptitude test scores? You can even go online and check if there are community events and organizations to gauge what is important to the people that live there. You may find that that school district with a low score is actually perfect for your other needs.
There is still help for home purchasing.
After the housing bubble burst, lenders had to put a tight leash on their practices… and for good reason. Zero percent down loans and huge balloon payments nearly crippled the American economy. Those things are still big no-no’s, but there is still first-time home buyer help available. Just Google “first time home buyer” and your state or county, and check out what you can get. In my area, there is help with down payment loans to avoid paying a PMI (private mortgage insurance) and exclusive below market rate homes. There are strict requirements and limits but it can vary county to county and even between cities in the same county. These sites can be a great resource for those just starting the home-looking process. Also, as any frugal HSJ Fund reader should know… shop around for lenders for the best loan possible; value is not created equal.
These are just a few of the things I’ve learned or so much more. The home looking/buying process is absolutely daunting to me. It can completely swing the balance of your net worth, your day-to-day living, and your sanity. Best advice I’ve gotten so far is to understand what you want and can afford. Before even looking at listings, get pre-approved! Otherwise, you’re just playing a guessing game… and often getting your hopes up for something you cannot even afford. Once you have that, sit down with your partner/spouse and start creating a list of must have, wants, and absolute no’s… and stick to it. Good luck out there! I’m hoping for the best for both you and me!
The Hop Skip & Jump Fund 