2020 BOISE IDAHO REAL ESTATE BLOG
5 Tips to Break the Rent Cycle and Buy a House Main Treasure Valley Life

Homeownership is an amazing part of life. You build equity and get tax advantages such as mortgage interest deduction and capital gains exclusions. Most of all, you get to actually own your space. This is a much better alternative to paying your landlord’s mortgage, sharing a space with roommates, or living in a cramped apartment complex with outdated units.

However, home prices are on the rise around the country—especially in Boise and the Treasure Valley—and often outpace wage gains. This makes it harder for renters to save their hard-earned money for a down payment. This vicious cycle keeps renters as renters instead of homeowners.

So how can renters break the cycle and become home buyers? Here are a few ideas to begin saving for your new home. Keep in mind, everyone’s situation is different, so some tips may not apply to everyone.

Speak with a financial professional

Buying a house is a major milestone, especially for first-time homebuyers. The large price tag feels daunting in addition to the long-term implications of owning property. Begin your home search with an accountant, mortgage broker or financial planning professional. They will assess your income, living expenses, and credit score to find what you can reasonably afford. Once you know your price range, you have a tangible goal to save toward. Financial professionals can also point you to first-time homebuyer programs.

Get your credit score in good shape

Having a good credit score is like your GPA or SAT score. If it’s high, you are not afraid to show it off a little and you don’t worry about it. If it’s low, you don’t talk about it much. If your credit score is the latter, stressing about it won’t improve it. Luckily, you have total control over your credit score (barring identity theft or fraud). Your credit score is the top factor in determining your interest rate. A higher credit score will help you get a lower interest rate and lower the possibility of needing loan insurance. Loan insurance will add to your monthly payment. In order to raise your credit score, pay down or pay off credit cards and loans. The less you use your credit card and the faster you pay if off, the higher your score will be.

Cut back expenses and save now

Track your monthly expenses against your income and eliminate unnecessary spending. For example, use less energy and water to lower the utility bills, stop going out for coffee, lunch, and dinner. Take what you saved from cutting back and put that into savings. You’ll be surprised how much you can save from your paycheck! In addition, you can work odd jobs or get another part time job that pays directly into your down payment savings. Whatever your situation, make a plan and a budget, and stick to it.

Low or no down payment home loans

If you want to buy a house now, there are options for buying a house with little or no down payment. The biggest downside is that you will most likely pay mortgage insurance and have higher interest rates, regardless of your credit score and interest rate markets. Some big banks like Wells Fargo and Bank of America offer mortgages with as little as 3% down.

There are also some government-funded programs that offer zero or small down payment mortgages including:

Department of Veterans Affairs

Navy Federal Credit Union

US Department of Agriculture

Federal Housing Administration

Assess your own situation to see if you qualify for these programs. They have helped many people get into a home that would otherwise be renting.

Consider less expensive housing

When we say less expensive, we don’t mean to look for run-down properties or fixer-uppers. Rather, look for homes on the lower end of the price range determined by your financial professional. You will save money toward the goal faster, save on the sticker price, and have enough money to live on for the near future. The money you save by buying a cheaper house now can be used to parlay into a bigger, nicer house at a later date.

Contact our preferred financial professional, Jill Cattano, at [email protected] or (561) 303-7751

Use our free tool to calculate your mortgage payments.

 
Posted by AndrewS at 12/31/2019 12:56:00 AM
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Michelle Penick, Boise Idaho Real Estate Agent

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Michelle Penick

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