For years home ownership has been the American dream, but, according to the Pew Research Center, a higher percentage of us are renters than at any other time in the last 50 years. Is that a bad thing? Not necessarily. For many people renting may be the right choice. Every individual and family needs to consider all the factors and make the decision that’s right for them.
The Financial Consideration
There’s a rule of thumb called the price to rent ratio. You get it by dividing the price of a house by the annual rent. For example, if you can buy a house for $300,000 or rent it for $1500 per month, the ratio is 300,000 / (12 * 1500), or 16.7. When the number is 15 or less, buying is the better choice, when it’s 16 to 20, renting becomes more favorable and when it’s over 20 renting is significantly better. However, this fails to take in factors like down payment amount, financing terms, taxes, insurance and other costs, which can vary widely. A more accurate number, telling you how long it will take to cover the up-front costs of ownership and pull even financially with renting, can be found using one of many calculators available.
The Other Considerations
While this sort of calculation is valuable, there are other questions, both financial and lifestyle-related, that the potential renter or buyer must ask.
What can I spend upfront for down payment and closing costs?
Can I afford a major repair such as replacing a furnace or air conditioner? There are insurance-like plans to defray some of that cost, but those make up another annual expense.
How long do I plan to stay? Selling a home and buying a new one is costly and time-consuming.
Which is more important to me, stability or flexibility?
Advantages of Home Ownership
As the inheritor of the American dream, the homeowner has some opportunities and privileges that the renter can’t enjoy.
Appreciation and equity. As home value rises and morgage balance drops, homeowners gain equity, which for many is their most valuable asset.
Freedom to remodel. There’s no landlord telling you what you can and can’t do with your property.
Stable monthly payments. Taxes and insurance can increase, but principal and interest payment remains the same. If you stay there long enough, eventually you’ll have no principal/interest to pay at all.
Tax advantage. For most people, it isn’t what it was before the 2017 tax changes, but interest and taxes may still be deductible.
Stability. You can become a member of your neighborhood and your children can stay in the same school system. No landlord can decide to sell and give you notice.
Advantages of Renting
No large upfront expenses.
Your landlord is responsible for major repairs.
Still some opportunity to build credit by paying rent promptly.
You have less at risk. You won’t be affected if property values fall.
Flexibility. If you choose to move you can easily give notice and do so.
Here’s one last question: which feels better, the satisfaction of owning your own castle or the freedom to change your life quickly? The answer may go a long way toward pointing you in the right direction.
If you want to buy a terrific house at a budget-friendly price, it generally is a good idea to plan ahead as much as you can. In fact, with a homebuying strategy in place, you can boost the likelihood of a fast, seamless homebuying experience.
Now, let's take a look at three tips to help you craft a successful homebuying strategy.
1. Think About Your Homebuying Goals
Do you want to live in a warm-weather region? Or, would you prefer to buy a house in a city or town where you can experience all four seasons? Regardless of where you want to live, you need to think about your homebuying goals and incorporate them into your homebuying plan.
Make a list of what you want to find in your dream house – you'll be glad you did. With this list, you can narrow your home search.
Also, it often helps to review your future plans as you put together a homebuying strategy. For example, if you intend to return to school, you may want to consider houses located near top colleges and universities. On the other hand, if you plan to settle down and start a family, you may want to pursue houses near parks and other family-friendly attractions.
2. Consider Your Financing Options
Buying a house likely will be impossible without home financing. Fortunately, there is no shortage of home financing options available.
Oftentimes, it is beneficial to meet with a variety of banks and credit unions. These financial institutions can teach you about myriad mortgage options and help you get pre-approved for a mortgage.
Once you have your home financing settled, you can incorporate a budget into your homebuying strategy. Then, you can check out available houses and avoid the risk of overspending to acquire your ideal residence.
3. Consult with a Real Estate Agent
Developing a homebuying strategy sometimes can be tough, particularly for those who are crafting a homebuying plan for the first time. Lucky for you, real estate agents are available nationwide who can help you complete a successful homebuying journey.
A real estate agent is happy to meet with you and discuss your homebuying goals. He or she also can review your homebuying strategy and offer expert homebuying recommendations.
Let's not forget about the support that a real estate agent can deliver during the homebuying journey, either. A real estate agent will set up home showings, keep you up to date about new houses as they become available and negotiate with a seller's agent on your behalf. Perhaps best of all, a real estate agent will help you minimize stress throughout the homebuying journey and ensure you can purchase your dream home in no time at all.
If you want to get the most out of the homebuying journey, creating a homebuying strategy is a must. Take advantage of the aforementioned tips, and you can craft a successful homebuying strategy.
If you’re hunting for a new home and have come across one that fits all of your requirements and more, it can seem like the only thing you can do is make an offer and wait.
However, your first choice could also be another buyer’s dream home. And, if a higher bid isn’t feasible, you have to find other ways to win over the seller. One way this can be achieved is through writing a letter to the owner of the home.
If you’re bidding on your dream home, writing a letter the the owner can be anxiety inducing. Choosing what to reveal and finding the right words can be scary, even for the most seasoned writer.
So, in this article we’re going to walk you through writing a letter to a seller to give you the best possible chance of winning the bid for a new home.
Tell them why you love their home
If you’ve fallen in love with certain aspects of the home, there’s a good chance the sellers did too. Be personal in your explanations. Rather than just say you love the location, mention that it is a perfect distance to walk to the playground with your children or pets. This will help buyers better understand you and your story.
If you have family who lives nearby, or if the home has features that can greatly improve the life of you, your family, or your pets, be sure to mention this in the letter as well.
Don’t press or plead, just be polite
It can seem desperate and off-putting to receive a letter pleading with you to sell your home to someone. So, when you’re writing your letter and you come to the end, simply thank the buyer for their time and for reading, compliment them once more, and wish them luck in their new home.
Revise and review
It can be tempting to send your letter immediately after writing it, especially if writing is you don’t like writing in general. However, it’s always a good idea to revise. I suggest writing your letter one night, then reading it again the next evening to give yourself time and distance from it--this way you’ll be reading it with fresh eyes and will be able to find any wording that sounds strange or confusing.
It’s also a good idea to run your writing through a free proofreader like Grammarly. And, finally, there is no substitute for having an editor. Ask one of your friends or family members to read the letter and give you feedback.
Stand out from the crowd
There are a few things you can include in your letter to set you apart from other potential buyers. Including a family photo will help the sellers put a face to the names you mention in the letter.
It can also be helpful to print and mail the letter, rather than sending it electronically. Since we so rarely receive a physical copy of a letter these days (unless it’s from a bill collector), it can be nice to receive something positive in the mail for a change.
If you find your dream house, there is no need to leave anything to chance. But if you submit a "lowball" homebuying proposal, you risk missing out on the opportunity to acquire your ideal residence.
Putting together a competitive offer to purchase can be easy. Now, let's take a look at three tips to help you craft an aggressive homebuying proposal.
1. Study the Housing Market
The housing market fluctuates constantly. If the real estate market favors buyers today, it may shift into sellers' favor tomorrow, or vice-versa. As such, you should study the housing market, determine whether it favors buyers or sellers and craft a homebuying proposal accordingly.
Oftentimes, it helps to look at the prices of recently sold houses in your area, as well as how long these homes were listed before they sold. With this housing market data in hand, you may be better equipped than ever before to differentiate a buyer's market from a seller's market. And as a result, you can boost the likelihood of submitting a competitive homebuying proposal.
2. Know Your Budget
If you know how much you can spend on a house, you can minimize the risk of submitting an offer to purchase that stretches beyond your financial limits.
To establish a homebuying budget, it generally is a good idea to get pre-approved for a mortgage. Banks and credit unions can teach you everything you need to know about different mortgage options and help you select the right mortgage. Plus, if you have any questions as you evaluate your mortgage options, banks and credit unions are happy to respond to your home financing queries.
3. Collaborate with a Real Estate Agent
If you hire a real estate agent, you can submit a competitive offer to purchase on any house. In fact, a real estate agent can offer in-depth housing market insights to help you put together an aggressive homebuying proposal that may receive an instant "Yes" from a seller.
A real estate agent is a homebuying expert who understands what it takes to purchase a home in any housing market. He or she first will meet with you, learn about you and your homebuying goals and create a personalized property buying strategy. Next, a real estate agent will help you pursue houses in your preferred cities and towns until you find one that matches your expectations. And after you discover your ideal residence, a real estate agent will make it simple for you to submit an offer to purchase that fulfills the needs of all parties involved.
Of course, if your offer to purchase your dream home is accepted, a real estate agent will guide you through the final steps of the homebuying process. Or, if your homebuying proposal is rejected, a real estate agent will help you reenter the housing market.
Avoid the danger of submitting a lowball offer to purchase your dream house – use the aforementioned tips, and you can craft a competitive homebuying proposal and move one step closer to acquiring your ideal home.
Do you ever wish that they taught a class in high school called, “Things You’ll Actually Need to Know In Life?” You’d learn how to prepare your taxes, what investing is, and how to buy a home.
Unfortunately, all of these important life lessons tend to be self-taught; you pick them up along the way and learn from your mistakes.
However, it needn’t be that way. Our goal today is to give you an accurate idea of what to expect when you’re buying your first home. We’ll go over a typically home buying timeline and discuss how long each step can take. This will give you a better idea of how long it will take to close on your first home.
Step 1: Build credit and save for a down payment
Estimated time: 2+ years
The first step of buying a home is to make sure you’re financially secure enough to do so. While there are ways to purchase a home with low or no down payments (See FHA, USDA, and VA loans), generally it’s wiser to wait until you have a sizable down payment saved. This will save you money in interest and mortgage insurance in the long run.
Next, you’ll need to start working on your credit. If your credit score took some hits due to late payments when you were younger, now is the time to start fixing those mistakes by making on-time payments and paying off outstanding balances.
Step 2: Have a plan for the next phase of your life
Estimated time 6+ months
One of the most important, and least talked about, parts of buying a home is understanding what it means to own a home. If you have a spouse, partner, or family, you’ll need to be in agreement that you’re prepared to stay in one place for the next 5 or more years.
Buying a home is expensive and you won’t want to go through the process of closing on a home if you aren’t sure you’ll stay. This means making sure your career won’t bring you elsewhere in the near future.
Step 3: Get prequalified and preapproved
Estimated time 1-3 days (depending on how much initiative you take)
Getting prequalified for a mortgage takes minutes. You simply fill out an online form and the lender will give you an idea of the type and size loan you could qualify for. Be forewarned: they’ll also use this information to call and bother you about getting a mortgage from them.
Once you’re prequalified, it’s just a matter of working with the lender to provide the correct documentation for pre-approval.
Getting preapproved takes a bit longer (1-3 days), since it requires a credit check and some work on your part--namely, gathering and sending income verification.
Once you’re preapproved, you can safely start shopping for homes without worrying that you’re wasting time looking at homes that are overbudget.
Step 4: House Hunting
Estimated time: 30+ days
It’s a seller’s market. So, if you’re buying a home right now there is competition out there. You’ll need to dedicate a substantial amount of time to researching homes online, contacting sellers’ agents, and following up on calls. Like before, the amount of effort you put into this process determines how quickly and smoothly you’ll get through it.
Step 5: Making an offer and closing
Estimated time: ~50 days
Average closing times for buying a home has grown to 50 days according to a recent study. However, by securing financing ahead of time and acting quickly, you can drastically cut down the time of these process to as little as two weeks.