Buying your first home – How to protect yourself in a bad economy

You’ve gotten to the point where you can finally buy a home!  No more apartments!  No more renting houses with several friends!  You have reached the point where you can afford to BUY a home on your own!  The problem is that all you’ve been hearing is that the economy is in the tank, and the real estate market is one of the main causes.  So what do you?  The economy may be hurting, but you are making a good living.  How do you make sure you don’t buy someone else’s problem?  How do you make sure you don’t buy a home only to leave yourself in a lurch down the road?  Here’s some practical advice.

DON’T OVERSPEND!  Educate yourself or work with people that care about you and not just getting their next commission.  What you need to do is realistically look at what you spend, how you live, and what you can afford.  With all the talk of mortgage crisis you may think there is no money to lend, but if you are making a good living and have good credit there is a chance you could qualify for a lot more home than you really should buy.  My advice is to take it slow!  I suggest you take 6 months and keep track of just about everything you spend money on.  This is a good practice even if you aren’t buying a house.  You really should know where your money is going.  The first time you do this I guarantee you will be amazed at how much money you spend on eating out, but just get an idea of where the money is going.  While you do this see how much money you are able to save.  I believe you should be able comfortably save a minimum of $500 a  month ON TOP of what you pay for you house payment.  So it would work out like this:  Say you pay $700/mn in rent, you already save $1,000 a month regularly, and you can still put away an additional $1,000 month easily if wanted to.  Well do that for six month.  If you really can do that for 6 months than you know you can afford a $1700/mn payment on a new home without cutting into your $1,000 savings.  Remember this: ALWAYS SAVE SOMETHING.  If you find that you are cannot do this, or if you find that some months you can and other months you can’t, you need to make sure you manage your money well or you need to put off buying!

KNOW YOUR MARKET!  You need to educate yourself on your local real estate market.  I have written several posts saying that REAL ESTATE IS LOCAL.  You need to know what is going on in your market so you can make educated decisions on what you should offer.  Here are some things to look at and know:

1) Have your Realtor pull what has SOLD in the last 6 months.  I understand you can see all that is for sale on several websites, but I don’t really care about what people are asking for their homes.  I want to see what has actually SOLD.   In many locations you can get a good idea of what a home like the one you like has sold for, and see how close the home you like is priced to those.

2) Know the DOM. DOM stands for “Days on Market”.  Now I’m not opposed to buying a house that has been on the market a long time if it is the home you like, but you should just have an idea of what the average days on market is for your neighborhood, and if the home you like has been on the market for a much longer time you may want to ask why.

3) Don’t Settle!  If you are in a market that has a lot of homes on the market, don’t settle for one that has glaring issues.  Your Realtor should be able to tell you what you should avoid.  You may get caught up in one thing you really like about a house and give up certain things that make that house hard to sell down the road.  If you want to know more about what to avoid contact me: chris@chriscowley.com

The main thing is to make sure you don’t rush in and buy just because you finally can.  If you buy a home that is too expensive for you, then you will love it at first and hate it eventually.  Believe me, that first couple days in the house will be awesome, but as you feel a tighter and tighter pinch every week you will begin to hate the house.  I want to make sure you love the house when you first move in, and love the check you get at closing when you sell it!  Homeownership is still widely accepted as the quickest way to accumulate wealth, but unfortunately some are finding it the quickest way to poverty and messed up credit.  Educating yourself and working with people who care about you will help prevent any mishaps, and help ensure you put yourself on the right track and enjoy doing it!

Call or email me if you’d like me to help you find your new home!

CHRIS COWLEY
210-389-6006
Chris@ChrisCowley.com