Welcome back to stretching your dollar on Cheddar News.
I'm Christian Scher here at the stock exchange. Despite
an early pandemic boom in the housing market inventory and
affordability remain a challenge. The shortage of homes on
the market and high borrowing costs have pushed prices even
higher with a typical US home value exceeding$350,000 for
the first time in history. That's according to the
Zillow market report. Joining me now is Holden Lewis
Home and mortgage expert at Nerd Wallet on how first
time home buyers can navigate this market. Holden,
what's the first thing a potential first time buyer should
consider when looking at a home? All right.
So the first thing they should consider is affordability.
You know, the the biggest mistake that first time
home buyers make is paying more than they can comfortably
afford for a home. So, you know,
the best thing to do is go to a mortgage
calculator, like the ones that Nerdwallet offers and it
takes into account your income, your debts, uh
all that kind of stuff and um you know,
current mortgage rates and it kind of gives you a
range of, of the price, the home price
that you should shop for? Ok, I like
that. That's really good advice. Let the calculator
do it for you. That's always convenient. So
credit scores obviously factor into this. What if your
credit is not as strong as it should be?
But you can still afford a mortgage. What should
you do in that essence? I mean, should
you try to raise that credit score or are there
other options that you can pursue? It's really a
judgment call and you can buy the house now and
pay a higher mortgage rate than someone with a really
high credit score. And then in a few years
hope that you raise your credit score and mortgage rates
go down both of those things. Um, you
know, they're, they're, they're likely to happen
probably or you can we build that credit score even
higher, you know, the the risk that you
run if you do that, of course, is
that home prices could continue to rise. So it's
really just kind of one of those things that you
just got to kind of weigh and make your own
decision. There's not, there's not really a just
kind of a prepared answer to that. Ok.
Obviously insurance and potential out of pocket costs like a
fees are part of the equation as well. How
do those factor in and how much should you expect
to pay? Oh man, I tell you,
you know, insurance especially it varies so much.
The thing to do is that when you're shopping homes
, have your agent ask how much the current homeowner
pays for ho a fees and insurance and property taxes
and just make sure that you incorporate those things into
your monthly, uh, affordability. What's the biggest
mistake that first time buyers make? The biggest mistake
is over paying for a house. And you know
what happens is like, they can technically afford the
house, but then they're really stretching far and they're
finding out that like, oh, ok. Well
, they're gonna have to get the second best day
care instead of the best day care that they're going
to have to, you know, not get the
car that they want scrimp on vacations. And so
it's really important to really think about how your house
payment fits into your whole life and what you want
to do with it. What about a fixer upper
or even a home in foreclosure? How should a
first time buyer approach those properties? Hey, you
know, if, if you're really up to doing
the work, buying a fixer upper is just fine
. Here's something to keep in mind. There's really
a difference between a fixer upper and an outdated home
. And a lot of people look at those things
and kind of think they're the same, but a
fixer upper. It needs a lot of work just
to make the house comfortable and safe. Whereas there
are a lot of outdated homes out there, like
they're being sold by Boomers. Right? And maybe
the house has really good bones. There's not any
problems with the roof or the air conditioning, but
just the carpets and the paint and the cabinets are
really outdated. Those can be a really, really
good deal because you can buy that and relatively inexpensively
, relatively compared to buying a fixer upper, you
can make that house the way you want, it
, rip those carpets up, refinish the floors,
paint the walls, that sort of thing. Uh
Rent to home, is that something that people should
look into rent to own? Hey, you know
that, that, that is a way to buy
a house. Not a whole lot of people do
it, it is pretty complicated. It's also called
lease purchase and it works like this, you sign
a contract that you're gonna rent the house for a
certain period, say 1 to 3 years usually and
you pay the market rent on that and then you
pay extra on top of that every month and that
extra goes toward your down payment. And then at
the end of the rental period, you apply that
down payment money to it and you buy the house
and that can help you build up your credit score
in the meantime. So, you know, it's
a way to people buy houses. I would suggest
getting an attorney involved before you sign that contract and
um and just making sure that the owner, the
landlord really has clear title to it and will be
able to actually sell it. All right, Holden
Lewis, thank you for joining with the tips that
we all need.