There are so many things to think about when contemplating a home purchase (location, price, size, number of rooms, specific neighborhoods and schools, etc.) that your clients might forget to consider these four things:

  1. Home Buying Assistance Programs
    1. These programs are available in many cities and many states via their Housing Authority offices.
    2. Colorado, for example, offers first-time buyers down payment grants up to 3% of the mortgage AND Colorado does NOT have a repayment requirement for these programs.
    3. The nationwide Teacher Next Door Program offers teachers, administrators and school staff personnel down payment assistance in amounts up to $10,681.
    4. ccording to a 2018 report from the Society of Human Resource Management, 3% of employers offer mortgage assistance programs. It doesn’t hurt to ask.

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  2. Low Down Payment and Mortgage Programs
    1. FHA loans, backed by the federal government, require only 3.5% of the purchase price of the home as a down payment.
    2. Be cautious – there are several downsides…
      1. The lender may require the buyer to purchase private mortgage insurance (PMI) until the buyer has put in more that 20% in home equity.
      2. The cost of PMI may cost between 0.5%-1% of monthly mortgage payments each year that the lender requires such insurance.
  • Depending upon mortgage rates, the buyer may end up paying more in PMI payments over the long run than in initially making a down payment of 20%.
  1. Renting Out Part of/All of the House
    1. Rental income may produce enough to offset some ongoing housing costs such as mortgage payments and maintenance costs.
    2. “Offsetting expenses is one thing, covering all costs and expenses for an entire month and/or year is another,” offered Erika Safran, founder of Safran Wealth Advisers.
    3. When renting out part of/all of the house, first familiarize yourself with local laws.
      1. Does the neighborhood, HOA, etc. allow short-term rentals?
      2. Research landlord-tenant rights and rules.
    4. Have the tenant sign a lease – Rocket Lawyer and NOLO are good sources for leases.
  2. Have a Budget for ALL Household-Related Expenses
    1. Property taxes
    2. Homeowners insurance
    3. Cost of PMI if putting down less than 20%
    4. 1% of the home’s purchase price to be set aside for repairs and maintenance
    5. Use a mortgage and housing cost calculator to help you determine if/when it makes sense to buy.
    6. If renting out part/all of house, immediately fix broken appliances, roofs, leaks, etc. so income is consistently incoming…there is no income when things need fixing/repairing/replacing.

 

Thanks to Allizah Salario with grow.acorns.com for source data.

Also read: 8.3M First-Time Buyers On Their Way into the Market, Are iBuyers Good for Sellers?, Could Widening Crack in Mortgage Market Sink US Home Prices?