Buying a house is difficult enough; unless you have cash on hand, you’re going to have to jump through quite a few hoops to get the perfect loan, sign a few forms, and find a house that you can afford. Unfortunately, in this current economic climate, the upcoming generation (millennials) are having a difficult time purchasing homes.
Fortunately, there is hope. There are a lot more options in terms of purchasing a home then many may realize. From doing your homework and going the traditional route to purchasing a home on a short sale (which has its own unique set of pros and cons), finding the right way to buy a new forever home.
The Regular Way
This is the way this generation’s parents had bought their home (most likely). Although it seems simple enough—find a real estate agent, find a home, get a loan, pay it off—there’s a little bit more nuance to this.
The first thing you should absolutely do before anything else is save for a down payment. Just like building a strong home, a down payment creates a strong financial foundation for your situation. It’s recommended that you put about 10 percent of the price of a home for your down payment.
Once you have the down payment saved up, get pre-approved for a mortgage. This gives you a leg up over the competition (other home buyers who are reading this post most likely) as there are a few more steps involved, but when you show up with a preapproved letter, it shows that you’re a serious buyer with great financial security.
The next step is finding a real estate agent. You may be tempted to use your aunt Cathy who is able to get the best deals around but do your research. Finding the best real estate agent will make the next steps go smoothly. He or she will be able to help you find the right home, submit an offer, and will come with a clipboard and pen and write down every little thing during the house inspection.
After that, if your offer is accepted, you can move in and start paying down your mortgage. Easy peasy, except of course this has become a lot harder for millennials. That isn’t to say it’s impossible, but like the age-old saying says, “Easier said than done.”
Trying Your Luck at an Auction
A popular alternative to buying a home is actually going to an auction. Real estate auctions are growing in popularity. Although it’s more commonly used to purchase some property to either flip or rent out, going to an auction to acquire a forever home is a trend that is on the rise.
Thanks to the housing crisis a few years back, many homes have been foreclosed upon, which, in turn, were then sold at an auction. Don’t let this sour your view on real estate auctions; yes, foreclosures happen to be the most popular form of auction, but that doesn’t take away from the fact that you have the possibility of getting a new home for substantially less than usual.
It should be noted that yes, the picture in your head when you read auction is partially correct. Live, in person auctions are a thing; there might not be a man speaking loudly in a megaphone while a bunch of men in mismatched suits shout over each other, but there are people there who want to buy the house for sale in Burnaby at a discount.
If you are attending a live auction, make sure you do your research on the house. You don’t want any surprises to come up if you win. Before that, though, you’re going to have to register with the auction in order to bid. Typically, you’re going to need to have proof showing you have sufficient funds for the property. Typically, you have to pay up front, but some places allow you to pay a certain percentage.
Online auctions are becoming more popular. They’re similar to the live auctions, but you can do everything in the comfort of your own home. The same rules apply though: you have to register, have all your finances in order, log onto the auction and, hopefully, win.
The major obstacle regarding purchasing a home through an auction, live or otherwise, is that you typically need to have all your finances in order and that typically means having the entire payment ready to go. This may seem daunting but purchasing a home this way saves you the hassle and stress of having to pay back any loans you would have originally used.
Should You Invest Your Time in a Short Sale?
Short sales are another way you can buy your home. Buying a short sale home is different than buying a home on an auction; you’re essentially purchasing a home before it enters foreclosure. It’s like going the traditional route, but you’re going to need a real estate agent experienced in foreclosures.
Understand, when buying a home short sale, pros and cons associated with the purchase are abundant. For starters, a few pros include price, less competition, and substantially less risk over purchasing a foreclosure. When you buy a home on a short sale, the short sale is typically done to avoid foreclosure by the original owner. They typically want to sell it for as much as possible, meaning that you won’t have to worry about any rundown home with fixtures that won’t work.
A few cons to buying a short sale, however, is that it can take a lot of time. There are quite a few steps that need to happen before your offer is accepted. Also, understand that although short sales are often deals, the price can still be high, and the wait just isn’t worth it. And just because the homeowner initiates the sale, that doesn’t mean they can afford to maintain the house, leaving you to pay for all the repairs.
One thing to take away from all of this, however, is to not jump into a house until you’re absolutely certain you can afford it, and that includes the payments you’ll make as well. A rule of thumb is that if you can barely afford the house, you can’t afford it.
Don’t rush things: take your time and make sure you do your research before you buy your house. It’s especially more difficult for millennials; the odds seem stacked against them, but that doesn’t mean that buying a home is impossible; it just means they have to get creative.