How Buying Your First Home Can Be More Affordable Than You Think

Over the past several years, you've been watching the news about real estate and home prices continuing to go up, interest rate volatility, and the low number of homes on the market and I'm sure you've thought that buying a house is just probably not going to happen for you...

In fact, a recent survey showed that 86% of renters believe that they cannot afford to purchase a home. What's worse is that 54% of those people believe that they'll NEVER be able to own their own home. (Link To Article)

Well, I'm here to help.

The idea of buying a home often comes with a hefty price tag in mind. However, with the right information, you might find that homeownership is within your reach, after all.

Lower Down Payments: Many first-time homebuyer programs allow for lower down payments! (No, you don't have to have the 20% your uncle probably said you did.)

• An FHA loan allows as little as a 3.5% interest rate for those who qualify
• A USDA loan can allow you to purchase a home with a 0% down payment

Mortgage Rates Are Going Down: Right now, mortgage rates are the lowest they've been in quite some time! When your rate is lower, your payment is lower. If you took a look at getting pre-approved last year, or even earlier this year, it's time to take another look at your buying power!

First-Time Buyer Programs: Did you know there are grants, programs, and special financing opportunities exclusively for first time home buyers? There are way more programs out there than you think and they could help get your down payment paid for, your rate lowered, or help pay for closing costs! 

Tax Benefits: Homeowners can benefit from mortgage interest and property tax deductions. Yes, you can deduct your interest and so much more! Everybody loves a tax deduction!

Understanding these factors can make buying a home more affordable. With the right agent & lender by your side, homeownership is not as far-fetched as it might seem! 

As always, I'm here to help - just reach out!

-Whitney

If you own a home, and have for more than 5 years or so, chances are you have a good bit of equity that you're sitting on! In fact, in the second quarter of 2024 over 49% of homeowners in the U.S. were considered to be equity - rich, meaning that the balances of their loans were less than half of the market value of their homes!

You've been paying your mortgage each month & ticking away at the balance of your loan and your home has almost certainly increased in value over the last several years as Americans have seen unprecedented appreciation due to rising home prices and the low number of homes on the market.

Cool! But if you're not planning to move, what good it that equity to you?

With interest rates expected to drop more throughout 2025, you'll be even better suited to utilize your equity to do a big home project, put a down payment on that vacation home you've been thinking about, or invest in a rental property! Let's talk about some of the options:

#1 - Open a HELOC (Home Equity Line of Credit)

Opening a line of credit from the equity in your home is a great idea for those who aren't planning to move or sell their home but would like to have a line of credit open to utilize their money! This is a great choice if you've thought about adding on that garage you've always wanted, finish the basement for more space, upgrade to your dream kitchen, or add on that in-law suite on the main level. Not only is this a great way to do these things without paying out of pocket for them, but they're also fantastic value adds to your home that only increase your value and equity even more!

#2 - Do a Cash-Out Refinance

You can refinance your current mortgage to a lower rate, allowing you to keep or even lower your monthly payment and get the equity you have in your home out in cash!

My recommendation: put this equity you pull out to work! To purchase an income-producing rental property, you can apply the cash you pull out as/toward a down payment! Your rental income should (and let's talk about this more together) cover the mortgage, expenses, and a little extra income in your bank. Now, you're building equity in another property and you've leveraged your initial investment into your home into another one!

#3 - Tax Deferred 1031 Exchange

This one's for folks that a rental property, commercial properties, or other investment properties: If you've got a property with a good bit of equity and you see the value of selling that property to be able to use the proceeds toward other investments, a 1031 exchange is a great way to do that and defer your capital gains taxes.

Example: You bought your first home a while ago and when you moved you kept it to use as a rental property. That house is now making income for you, but it's appreciated in value so much over the years that selling it would get you a large enough profit to really be able to put some money into an even bigger opportunity! Selling that property and deferring the capital gains tax by putting the profits into another property (or properties) when interest rates drop is a proven strategy by investors to build wealth! Bonus: a 1031 is pretty flexible because you can invest in a single property, multiple properties, or different types of properties.

THE BOTTOM LINE:

You earned this equity by working hard to pay your mortgage and maintain your home/property: so put the fruits of that labor to work for you!

Important to note: this money isn't free to get out. With a HELOC or Cash-Out Refinance, you will pay an interest rate to use/borrow the money using your property as collateral.

Reach out to me and let's talk about which local lenders/banks offer the best rates and programs so you are able to use your home's value to the best advantage!

Hot Take: First Time Home Buyers SHOULD be Thinking Like Investors.

Here's what I mean...

If you are or know a first time home buyer right now, you're probably thinking and hearing a lot of the same things: 

• The price of homes that I really want are too high!
• These interest rates are keeping me from being able to afford a house I love!
• My dream house isn't out there.
• If this house only had_______!

How, as a first time buyer can you shift your thinking about your first home? Think like an investor!

Instead of searching for the perfect house, or one that even checks all or most of your boxes, find one that has the biggest plus going for it right now: opportunity.

A house that presents with what you might see as challenges (an unfinished basement, no central air conditioning, an outdated kitchen, only one bathroom when you'd rather have two) but is workable for you now, can actually be your best move. Here's why:

1. Purchasing a home instead of renting gets you paying your own mortgage instead of someone else's plus more.

2. When you pay your monthly mortgage payments, you're building equity!

3. While you own your home, it will appreciate in value!

4. Making improvements slowly over a few years, like finishing a basement, adding a central heating and cooling system, updating that kitchen, and adding a second bathroom into the floorplan increases the value of your home! When the value increases, so does your equity!

When you're ready to move up to that next home, you have options: Sell the home and cash in on your equity and your house that's increased in value - OR - turn your home into your first rental property & create some passive income for yourself! (Bonus: you can do a cash out refinance to pull some of your equity $$ out toward your new home AND keep your rental property too!)

If you're a first time home buyer and the prospects look a little disappointing, it's going to take a little re-framing right now. Your first house probably won't exactly be a dream house, but look at it, instead, as a rung on the ladder that will get you there!

Looking and want help crunching the numbers and seeing the possibilities? I'd love to work with you to do just that and get you investing in yourself and your future happiness and financial stability!

There are a LOT of things to consider when setting your rent rate for your investment property, but one of them that is often overlooked is whether or not to include the cost of utilities in your tenants’ monthly payment, or to have the tenant pay utilities themselves. Seems like a simple enough question, right? 

Pros of Including Utilities:

#1 - Convenience is key. Tenants will be attracted by having one bill to pay versus several bills! Plus, it gives them a budgeting advantage; their bill for everything about their housing will stay the same every month! 

#2 - Fewer late rental payments. When the tenant only has one bill to pay per month, it makes budgeting easier for them which makes them more likely to pay on time. Plus, fewer late payments from the tenant keeps your income steady.

#3 - Lack of Service Interruption. Being the one responsible for the utilities allows you to ensure that they don’t get cut off for lack of payment. Power being turned off could mean freezing pipes, damaged appliances, and a lot of money spent repairing the damage! 

Cons of Including Utilities

 #1 - Higher Rent Costs. Factoring in all, or some, utilities will make your rental more costly than those who don’t. The key is to make sure you highlight what’s included so you don’t deter prospective renters!

#2 - Tenant Accountability Goes Down. I’ve seen it firsthand: when tenants aren’t financially responsible for the usage of their utilities they don’t exactly have incentive to conserve resources, which leads to excessive usage and higher costs for you. Also, they’re less likely to report leaks or heating/cooling systems that aren’t functioning properly because they’re not seeing the increase in the water or power bill! The key here is to monitor and or have a usage threshold where they pay an additional fee for higher usage.

#3 - Landlord Liability Goes Up. When utilities aren’t paid, services get cut off. Now, that burden is 100% on you. If a tenant is late on their rent, you may not have enough income to cover their monthly utilities along with being out their rent! Even if they stop paying and you have to go through the eviction process, you’re obligated to maintain the utilities. 

What do I do?

In my rental properties, I try to include as little in the rent as possible that can’t be exactly measured to eliminate variables on my end. Sometimes, you can’t do that if you have a property where a utility isn’t metered by unit so you have to estimate. In that case, I would have an average usage and set a usage threshold to add to your lease! If your use is above X, then you will be billed for the overage each month. This eliminates tenants who will run the AC & leave windows open, not report water leaks because it’s inconsequential to them, etc. Plus, schedule a property inspection either quarterly or twice per year to monitor for any leaks or other issues that could be causing higher than normal usages.

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