1. Low Down Payment Options
While I would never argue against any home buyer having at least 20% to put down on a home for a down payment, the reality is that the vast majority of first time home buyers invest very little money at all. With the high cost of rent in the Charlotte area and additional bills associated with life, it can be difficult to save a large down payment and the additional cost required for a home purchase.
The good news that few buyers know about is that there are dozens of programs that exist to help first time home buyers with their down payment and some even assist with closing costs. They include:
- Home Advantage from North Carolina Housing Finance Agency
- HouseCharlotte – Down payment assistance for certain neighborhoods in Charlotte
- USDA – up to 100% financing in USDA Eligible areas
2. New Construction & Foreclosure Homes Have Hidden Costs
New Construction housing is a great option for some home buyers but not for everyone and typically not for first time home buyers. More often than not, home builders want steep deposits based on the timeline to build and close – and then there are those other costs. Most do not realize that items like window blinds, drawer pulls, decorative wall paint, landscaping (among other items) are usually not included in the purchase of a new construction home. Some builders will sell them to you; however, it will drive up the cost of the home and the mortgage. As a result, most buyers end up spending thousands more after closing finishing the home exactly the way they want it. Additionally, some items like hardwood floors can be less expensive to have installed after closing than at the time of purchase.
Foreclosure homes are also viewed as potentially huge savings but they have hidden costs as well. Depending on how well the home was maintained prior to and since foreclosure, the home may need thousands in deferred maintenance repairs, which could make the property cost prohibitive. Unless you are experienced in construction and will have thousands left over after the purchase, it may be wise to avoid bank owned homes.
3. Relocation Homes Can Be Better Deals Than Foreclosures
Properties offered by relocation companies are often more rare to find than foreclosures but a good relo property can be an even better deal than a comparable bank owned home. One reason is that the home is usually maintained by the prior owner through the time the home was entered into a relocation program. Another is that the relocation company usually has each home inspected, provides a lengthy report for public inspection, and then has repairs made. While the report is a great starting point, it is in no way a replacement for your own home inspection.
A real estate agent can help you locate homes in relocation programs.
4. Ask for Closing Help
While I’m not an advocate for financing in items like window blinds and drawer pulls into your mortgage for 30 years, keeping your cash in your hands instead of spending it on closing costs is usually smart money. Essentially, when a buyer is asking for a Seller to pay for their closing costs, they are essentially financing a portion of their closing costs to the loan. The Seller is receiving a higher sales price but a lower net to them so be smart in your negotiations.
Here’s an example of why a Buyer might ask the Seller for closing help:
- The sales price of the property is $200,000 and the closing costs for the Buyer is approximately $6,000.
- The monthly principal and interest payment of a $200,000 mortgage at 30 years at 4.5% is $1013.37.
- Adding $6,000 to the mortgage amount brings the total to $206,000 and only increases the payment by $30.40 per month.
5. Buy Below Your Means and Make Extra Principal Payments
Owning a home doesn’t mean that you need to wait until you can afford a home that is four times the size you currently need and out of your budget. Considering the current cost of rent in Charlotte, purchasing the right home can save you hundreds of dollars per month over the equivalent rent. While some buyers take this to mean they can purchase a much larger home with a payment more in line with what they are paying in rent, consider purchasing a home that is less than your current rent. With the additional money, you can pay down debt, improve the property, save it for a rainy day or retirement, travel, etc.
Buying below your budget means that you can apply extra money to the principal balance of your mortgage each month to pay it down and save money in costly interest. For example, paying an additional $50 a month towards the principal of a 30 year mortgage will decrease the term by 2 years, 9 months.
6. Can you Assume the Seller’s Mortgage?
One of the hottest trends that I am anticipating in the coming years are assumable mortgages. The idea with an assumable mortgage is that the new buyer can (if they qualify) assume the mortgage terms of the Seller. The Buyer would then either pay the difference in cash or take a second mortgage out for the difference. Assumable mortgages were a popular marketing tool in the 80’s when mortgage interest rates were 15-20% but became unnecessary as rates settled below 10% in the early 90’s. A few years back, the Fed’s bond buying program enabled millions of homeowners to refinance their mortgages at unheard of sub-4% interest rates and some are assumable. As mortgage rates are expected to rise over the coming years, a Seller with a ultra-low interest rate that is assumable would be extremely attractive opportunity for any buyer.
7. Get Instant Updates from the MLS
For the last 18-24 months, many first time home buyers in the Charlotte area have found it frustrating to purchase affordable housing because of a lack of available housing inventory. The solution: beat the other home buyers to the punch by seeing the homes as soon as they are listed for sale on the market. Most very popular websites only update every 24-36 hours with new listings and that is simply too late. Fortunately, the local multiple listing service has a feature that will notify potential buyers the instant a home is entered into the system that matches their criteria. Don’t expect there to be pictures right away but, if the home was listed on the market in the last few years, there will be photos of what the home looked like at that time.
Our website, CharlotteHouseHunter.com, updates every 15 minutes with new listings.