Are you currently renting but have previously owned a home in the past during a marriage or other partnership and think that you cannot afford to buy one on your single or double income? Well think again as I know that it is possible to buy a home again for very little out-of-pocket costs. I was once in your shoes, newly divorced and trying to navigate the very scary financial waters of living on a single income again. After renting for 4 years, with the last 6 months of it managing dealing with a horrible apartment and landlord, I decided that it was time to figure out how to purchase my own home. With a little money, a decent credit score, advice and determination, you can do this too.
While there are many different options out there, I want to share with you the way that I did it as I believe a lot of people are not aware this is possible, especially if you have previously owned a home or more. Did you know that, if you haven’t owned a home in the last three years, that you are eligible to be considered a first-time homebuyer again? Yes, it is true and I was able to purchase my own home for only $1400 out of pocket costs. Interested in learning more? Then check out my six tips below on how to do this.
Tip #1 – Research Local Banking Mortgage Opportunities
There are many mortgage opportunities available for first-time homeowners; however, I found that working with my local credit union was the best for no down payment, low closing costs and a very quick time for finalizing the home purchase. With a decent credit score, approximately $1500 in savings, and the willingness to purchase a home that might require some cosmetic fixing up, I was able to easily get into my first home as a single-income individual.
Even though I had owned two homes in the past during a marriage, I was still able to qualify as a first-time homebuyer again. This is because I had not owned a home in at least three years. Since my credit union offered a 100% financing option to first-time homebuyers and with the assistance of a real estate agent, all I had to do was to pay a $500 earnest fee and upfront property taxes and insurance to get into my home. Also, even though it is very wise to hire a respected company to perform a home inspection, I chose to forgo this cost and have a competent family member to inspect for me. If you do choose the home inspection, plan to spend another approximate $400 to $500.
No closing costs? Have no fear as my bank was able to finance those into the back-end of my mortgage, therefore, I did not have to come up with the $4000 to $6000 normal closing costs on purchasing a home. All you have to do is ask these questions to your banking mortgage officer…that simple.
Tip #2 – Find Your Current Credit Score
The second most important tip for purchasing a home again is to know your credit score and how it will affect what you can afford. A score of at least 580 is a must for purchasing a home but having one even better than that can truly help. My credit score was only 620 when I purchased my current home about four years ago. Even though a credit score of 620 may not be the greatest, it was still sufficient enough to get me into my first home as a single divorced individual.
If you have no idea where to begin on determining your current credit score, I would suggest using experian.com or contacting the bank of your choice to begin the mortgage process. Either avenue will show you credit scores from three different places. Even if your credit score is not sufficient enough now to allow for a bank to offer financing to you, it will be a great start to knowing what you need to work on. Either way, you can receive great advice on how to improve on and get the credit score you need in the future to purchase a home.
Tip #3 – Save at Least $2000
As stated above in Tip #1, you will need approximately $1500 to $2000 in savings to be able to get into your first-time second or third home. These amounts are similar or less than what you would have to come up with to rent a home. So why not purchase to build important equity? If you don’t have this amount in savings yet, I would suggest to start with my article called How to Create a Simple Budget to get you started on a plan to start saving for what I call “The Musts”. No matter what your current financial situation is, make a pact to not let a landlord take and keep your hard-earned money to build his/her equity and wealth. That is nothing but a lose-lose deal for you and a win-win deal for them.
Tip #4 – Find a Real Estate Agent
Finding an experienced real estate agent is not very difficult. One good way to start is to submit an online request through your local top real estate agency. The second-best way is to just ask around. Ask friends, family and coworkers about who they have previously used and had great results with. Thirdly, you can walk into a real estate business and ask for assistance.
From my experience, I have never been turned away or received bad treatment for exploring the purchase of a home. Even if you end up finding out that you do not currently qualify to purchase a home, the process of speaking with a real estate agent will help you explore all available opportunities and set up a future plan. This process is a very essential learning experiment.
Tip #5 – Start Exploring Homes
The fifth tip to owning a home for the first time is to just go exploring. Go see what is out there. Exploring homes is the most fun part of the whole homebuying process…or at least it is in my opinion. This is the part of the process where you get to imagine what type of home you want or at least what you want for a few years into the future until you can afford what you truly want. Even if you are unable to purchase your dream home at this point, it is so satisfying to understand that what you are buying can lead to that dream home down the road. This is where I am currently at…a home that has and still is building great equity…even though I know it isn’t my dream home.
Tip #6 – Buy a Home
Have you found the best banking mortgage opportunity for a first-time homebuyer? Did you figure out what your current credit score is and whether it meets the must-have criteria for purchasing a home at a decent interest rate? Do you have the absolute necessity of at least $1500 to $2000 set away in a savings account? Did you find a good real estate agent to help you navigate through the tedious and often complex world of homebuying contract negotiation? Have you discovered a decent affordable place that, with a little elbow grease, can help you build equity towards your dream home? If you can say yes to all of the above, then you are well on your way to one of the greatest investments you can make towards your financial success.
I know it is a little stressful to purchase a home but it will definitely be well worth it. If you have made it this far into the process, just keep going, roll up your sleeves and fight towards that end result of building equity and financial happiness that you have worked so hard to achieve. After four years in, 6 rooms stripped of old 80’s wallpaper, a brand-new water heater and many showers to wash off all the paint from my hands, I can say that I have no regrets for the almost $100,000 equity built off my home in four years. You can have this too. All it takes is the above six tips, determination and the desire to achieve financial freedom.