Aug 20, 2019
#Adulting: how many times have you seen that hashtag, or even said it aloud? We’re sure it makes older generations roll their eyes, but that’s alright. We know that adulting can feel hard, but we don’t think it has to be that way. That’s why we’re committing this little mini-series to all of you out there trying to “adult.” And as part of our #Adulting 101 Series, we’re diving straight into the deep-end, talking about housing.
Just thinking about buying a home can make a Millennial break out in sweats — or at least, that’s how the media makes it sound. But we know better. We know that student loan debt, ridiculous living expenses, and job insecurity all play a role in someone’s ability (and interest) in buying a house.
But beyond that, we think that sometimes people just don’t have the resources they need to pull off possibly the biggest #Adulting trick: buying a house. If you’re in a place where the thought of buying a house has crossed your mind, or you’re wondering when in the world you can afford to buy one, this episode is for you.
On top of sharing our own histories with home buying, we walk you through what it looks like when you start toying with the idea of buying a home. Are you thinking you want to rent for a while, but would buy if the right house comes along? Are you scrolling madly through Zillow trying to find a house within your price range? (Side note: Zillow’s “calculations” are a joke, so talk to a realtor and your bank before you get too excited.)
One of the major factors we talk about in the episode is knowing your income. If your income is variable, and or if you’re not sure your job is stable, buying a house can be a risk. But if you’re settled in your income, or you know your income will be increasing — through a big business deal, a raise, etc. — it may be good to look at houses in your price range now so that you can have even more cushion later.
But there’s something we really want y’all to know about buying a home: it’s not just the sticker price on the house you’re paying for!
Additional costs come with a mortgage, including:
Of course, that’s all once you’ve got the house on lockdown. But what about the down payment and closing costs? Down payments range from 5 - 20% of the total cost of the home, which is a huge chunk of change — and closing costs can sneak up on you. Your closing costs cover loan origination fees, appraisals, title insurance, taxes, deed transfers, and just crazy amounts of fees for all the paperwork you’ll be filing. You may also need to prepay property taxes, homeowners' insurance, or a homeowner’s association bill then, too. That can add up to thousands of dollars.
Now, keep in mind we’re not trying to scare you off from the prospect of buying a house. We’re just preparing you for all that goes into this level of #adulting. So… still interested? Cool. Time to talk about the 3 questions we think you should ask yourself when you think about buying.
This is pretty much where we all start, isn’t it? Our lease rolls around and we ponder the question “Should I re-up our lease, or is this a sign from the universe that I should buy?” So, we break down when you should consider renting, and when you might be ready to move on to Question 2.
When should you keep renting? When you have big changes coming up, and you’re not sure what that will mean for you:
Of course, there are always
exceptions to this general guideline, like being newlyweds or new
parents, etc. But if you’re not sure about your income especially,
or how much you need to save to achieve other financial goals, now
may not be the time to buy.
We don’t expect you to die in the first home you buy, but there are major benefits to buying a home you plan to stay in for at least 10 year. Yes, 10. Why? Because if you plan to buy a house and turn around and sell it in less than 2 years, you run the risk of selling during a market downturn, eating money on capital gains taxes (if you buy during a housing price boom), and spending even more thousands of dollars to buy your next house.
Of course, a starter home — meaning it’s more affordable, likely smaller, with fewer bells and whistles — can see you through a solid decade, even with major life changes. These homes are great if you’re single, just starting out in a relationship, are in the baby steps of your career or business, or you don’t want a big mortgage preventing you from living your best life.
But if you’re ready to just send it and find the home of your dreams, you may be able to find your forever home. This may mean spending more money on a bigger house that can accommodate a growing family, or is located in a prime area you want to stay in. This option is often best for people and couples who are really secure in their income and have been saving for their dream house for a while now, but there are always exceptions.
Whichever one is right for you,
we want to make one thing very clear: equity builds
slowly. Don’t expect to
buy a house and have tens of thousands of dollars in equity a year
or two later. You don’t see a lot of that equity until the end of
the mortgage, because most of your payments at the beginning go
towards the interest — it’s scaled so more interest is paid up
front. Because the banks know y’all want to buy a new house every
few years!
Most people assume they can do a fixer upper, but you’re probably not Joanna and Chip Gaines, OK? Especially if you’re buying a house with someone you love, home renos can bring out a whole new side of you both. It takes time and it can get expensive if you DIY and mess something up, so put a lot of thought into buying a fixer upper vs. something that is ready to go on move in day. Depending on your budget, you might be tempted to buy a fixer upper, but this is where we caution you to think again about your DIY skills. Remember your last #PinterestFail? Do you want that to be your whole house?
Decided which way to go there?
OK, now it’s time to buy a house.
This is where things get really juicy. On the episode, we walk you through how to get ready to buy a house. In general, and depending on your individual situation of course, here are a few tips:
Of course, you’ll need a really good bank and realtor to help you get the most out of your homebuying process, but the steps above are steps you can take now to get ready. As always, we go into more depth on these tips and the three questions above in this week’s episode, so if you’ve got houses on the brain, you should really take a listen.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual.