August 30, 2020

Know your pace so you can win the race!

It still surprises me to this day when a buyer is shocked to learn they don’t have enough for a down payment. Or they’ll say they wish they knew more so they could have bought years ago.

But then I remember- our school system failed us!  High school should have focused more on real life scenarios, such as taxes and mortgages. Instead it’s focused on getting someone from one grade to the next. We should be educating students on passing life, not a bunch of tests.  We should have learned about inflation, financial literacy, and pacing ourselves for life’s events. Today I am here to teach you how to pace yourself for homeownership.

The FIRST thing you should do is minimize your debt. It’s so hard to save money when you are paying high interest on money borrowed. It’s also difficult to qualify for any home loans when you have a lot of debt.

My next piece of advice is to keep your cost of housing low! Live with your parents as long as you can, find some roommates, or get a place with cheap rent. Who cares about luxury if your goal is to be a home OWNER.

Another important factor is to find out how much homes are in the area you want to buy. Once you do, look at an entry level down payment for 3%, 3.5%, or 5% down. If the house is under $450k I would be open to using down payment assistance.

After this you’ll want to find out how much the inflation rate is for homes in the area. A common mistake is that people forget to account for inflation when saving for a down payment. You work hard each year to save but you realize your goals start getting further and further away. Some people try to save an extra $1000 a month for 2 years and they realize afterwards that it had an extremely minimal impact on their monthly payment. Yikes!

Once you decide how much you need to save, discern if it is possible to do that within a timely manner. Two years is a good typical timeframe.

Remember, your first home doesn’t have to be your forever home. For example, on a 400k house, if you keep waiting each year to buy , with an increase of 4% a year due to real estate inflation you are tacking on more than $16,000 each year to the purchase price when you don’t buy.  In 5 years, the purchase price will be $486,000. In 10 years it will be $592,000.

It breaks my heart when people call me, eager to get qualified, but then we run the numbers and they realize they don’t have enough and they are well short of their goal. This is why I am so passionate about mortgage education and the reason I do what I do.

I’m here to help you get down the pace, so you can win this mortgage race!

Minh Nguyen

Minh Nguyen

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