Homeownership hasn’t lost its luster as the American Dream. The modern economy has made it more of a challenge, sure, but it’s still on many Americans’ To Do list in life.
What’s the big deal about owning a home? Financial freedom! Here at Sqwire, we have some pretty strong feelings about that subject—it’s the basis of our mission, after all. The short of the long goes like this: financial wellness leads to financial freedom leads to less stress, more living life to the fullest. Now that’s a goal worth working toward!
June is National Homeownership Month. To show our support for the American Dream, we want to talk about both sides of the coin: buying a home and selling a home.
The Basics of homeownership
Buying a home is exciting. Beyond the obvious pleasures, like finding a location and home style you love; decorating as you like; and having space for your hobbies, children, or pets, there are major financial benefits, such as equity, tax credits, and appreciation.
Home buying is also a serious endeavor since, for the majority of buyers, it’s the biggest purchase of their lives. So where do you begin? We’ve broken it down into a digestible list of steps.
Start saving early: Open a dedicated savings account for your down payment and set up automatic transfers from your paycheck. Even small, consistent contributions can add up over time. Additionally, look for ways to cut unnecessary expenses and increase your savings rate.
Improve your credit score: Your credit score plays a crucial role in securing a mortgage with favorable terms. Take steps to improve your credit score by paying down debt, avoiding late payments, and correcting any errors on your credit report. A higher credit score can lead to lower interest rates and better loan terms.
Explore first-time homebuyer programs: Many federal, state, and local programs are designed to assist first-time homebuyers. These programs can offer benefits such as lower down payments, reduced interest rates, and closing cost assistance. Research the options available in your area and see if you qualify.
Get pre-approved for a mortgage: Before you start house hunting, get pre-approved for a mortgage. This will give you a clear idea of how much you can afford and show sellers that you’re a serious buyer. Pre-approval can also expedite the buying process once you find the right home.
Work with a real estate agent: A knowledgeable real estate agent can be an invaluable resource for first-time buyers. They can help you navigate the market, identify suitable properties, negotiate offers, and handle the paperwork.
Be flexible with your wish list: Prioritize your must-haves and be flexible with your nice-to-haves. This flexibility can open up more options within your budget. Consider a fixer-upper too. Homes that need some TLC often sell for less than move-in-ready properties. Just be sure to factor in the cost of renovations and your ability to finance them.
Save for closing costs: In addition to the down payment, don’t forget to save for closing costs, which can range from 2% to 5% of the home’s purchase price. These costs include fees for the mortgage, appraisal, inspection, and title insurance.
Barriers to homeownership
One of the most significant hurdles to homeownership is the continuous rise in home prices. Over the past decade, home prices have surged, outpacing wage growth. This discrepancy makes it harder for first-time buyers to save for a down payment and get a mortgage.
Mortgage interest rates have also been on an upward trend. Higher interest rates mean higher monthly payments, which can be particularly impactful for younger buyers who might not have substantial savings or high incomes.
From Gen X to millennials to Gen Z, student loan debt is a significant barrier. High student loan debt can impact debt-to-income ratios, making it more challenging to qualify for a mortgage.
The Basics of Selling Your Home
Once you’ve achieved the milestone of owning your first home, a few things could happen. You might stay there forever, or you might decide its time to up- or downsize. What are some of the main factors to consider and challenges you might face?
We recently held a webinar with someone who knows home-selling (and buying) inside and out: Kimberly VanPetten, Realtor with Bershire Hathaway Touchdown Home Pros. With her expertise and wisdom, we’ve put together a brief cheat sheet for tackling another milestone in your American Dream: selling your home.
The first step is to select an agent. Seems simple enough, but VanPetten stressed the importance of finding the right agent. That means not any agent will do. It’s crucial to work with someone who is well acquainted with your local market. Ask friends, coworkers, or social media for recommendations.
Next, work with your agent to set a price. Your Realtor will do what’s called a “comparative market analysis,” which determines the current market value of your home.
Preparing your home is a critical step. Make all necessary repairs, declutter the interior, stage each room as much as possible, and tidy up the landscaping. All of this will help maximize the appeal of your home.
Now it’s time to market that baby! Having an experienced Realtor will be a huge support in this part of the process. Casting a wide net will help draw more yes, so make sure your home is syndicated out to all of the online listings and advertised on social media.
Once you’ve secured a buyer, it’s time for closing. To best navigate this process, stay in close communication with your Realtor and make sure all paperwork is completed accurately and on time.
The takeaway
Home buying and selling are both milestones to celebrate and challenges to tackle, especially in today’s economy. The good news is, with careful planning, smart financial decisions, and the right support, you can navigate the market and achieve your goals!
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