The Newlyweds Guide To Buying An Affordable House

August 30, 2008

One of the first things on the minds of newlyweds is buying a house. This is ironic, because most young newlywed couples aren’t in a good financial position to buy a house. Buying a house is a huge endeavor, and you must have SOME cash to buy it. The days of getting into a house with no money down and no closing costs have passed. It’s very tough to get approved for 100% financing, because lenders are much tighter on their underwriting guidelines. When the housing market took a tumble and the subprime mortgage market almost bankrupted our country, lenders retreated. Having said that, it’s a great time to buy a house. It’s a buyer’s market, and there are plenty of great deals on the market right now. Before you go shopping for a house, make sure you have these things in place:

  • At least a 3% down payment
  • Enough money to cover closing costs (you might be able to get this paid by the seller)
  • Make sure you are going to stay in the same town for more than 2 years.
  • Pay off any old debts or collections

Now, here are four steps that you can take to find an affordable house:

Research and hire a great real estate agent.

It’s a misconception that you can save a lot of money buying a for sale, buy owner house. Many FSBO sellers overprice their homes, and they are unwilling to compromise to get a deal done. Hiring a real estate agent can be the worst or best thing you’ll ever do. Do your research, and prepare interview questions when hiring a real estate agent. Stay away from family real estate agents unless they are really good at what they do and if they are willing to give you a cut of their commission. A great real estate agent can save you a ton of money if they are great negotiators. Great real estate agents are also great at finding hidden deals on the market.

Seek out short sales, bank-owned, and pre-foreclosure properties

Right now, you can find a huge amount of these distressed properties. A short-sale property means that the owner is upside down on their mortgage loan, but the mortgage company is willing to accept a sales price less than the amount of the mortgage upon their approval of the price. Everyone wins in this situation, because the seller doesn’t have to pay the difference to the their lender and you get a good deal. The problem is that these deals take a while to close, and mortgage companies are often stingy. Pre-foreclosures are simply properties that are somewhere in the process of being foreclosed, but the owner is still in legal possession and has the right to sell the property. You can find a deal here, but typically the seller doesn’t have much room to negotiate given the high mortgage amount, but they might be willing to update the kitchen, pay closing costs, and pay for a home inspection.

Negotiate your butt off

Start with a low offer, and prepare to start the negotiation process. Give yourself enough room to negotiate a price that you can afford. For instance, if the asking price is $200,000, then offer $150,000. They might counter back, but you could end up paying $175,000 when it’s all said and done. If you had originally offered $175,000 and they make a counter offer, you’ll probably end up paying $185k to $190k. Other great negotiating tools are closing costs, home inspections, a year’s worth of property taxes, and upgrades to the house. Have fun with it, and be willing to concede on a few of your demands in order to make the deal happen. If you want to find out how realistic the asking price of a home is, try looking it up on Zillow.com. Zillow takes the comparatives of other similar houses in the area that recently sold and formulates an estimate of the land plus the house.

Calculate how much you can afford before you start looking for a house

Add up your total gross income between you and your wife. Then, divide it by three. This is the maximum payment you can afford without feeling house poor. So, if your calculation comes out to $1,500, then you should start looking for houses in the $200k to $250k range. This is one of the most important tips for finding a house that you can afford. You must know your price range ceiling before you start looking at houses. Agents will try to get you to buy outside of your range, but be firm with them. Only look at houses out of your price range that you would plan on offering less than the asking price.

Conclusion

You can find a great deal on a house right now, but don’t get caught up in the moment. Renting for a little while is always an option. Buying a house is a great investment, but it can also be a huge burden on your marriage. I would not recommend that any newly married couple buy a house in their first year of marriage. I’ve been married for three years, and we bought and renovated a condo in our second year of marriage. There were some rough times, and painting ceilings at 12am wasn’t our original idea of being newlyweds. If both of you were well-established financially before you got married, then buying a house right before or after the wedding might not be so bad. Don’t take the housing process lightly. Be wise and use common sense. You’ll be fine. Good luck!

Erik

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Erik

Erik Folgate is a husband and father living in Orlando who’s been writing about money online for 6 years. Digging himself out of $20k of debt after college and his former experience in the insurance industry give him some useful insights into personal finance issues.


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Comments

8 Responses to The Newlyweds Guide To Buying An Affordable House

  • Kevin Moncton

    House buying does not really need to be that expensive. There are a lot of affordable houses that is of great quality. Affordable houses are great especially to those out of budget yet still wants to crave a good house for their own. To make things clear in having this kind of house, a house which is less cheaper but of great quality, then you must need a great and trusted REALTOR who will be there for you to guide and advice you if the house still suitable for living or not. Also, they could recommend you with lots of options that suit your budget and your needs. Thank You very much for this post!:)

  • Erik

    “You can find a great deal on a house right now, but don’t get caught up in the moment. Renting for a little while is always an option. Buying a house is a great investment, but it can also be a huge burden on your marriage. I would not recommend that any newly married couple buy a house in their first year of marriage.”

    Tim, did you read my conclusion? I thought that i was pretty clear that buying a house should not be taken lightly as a newlywed couple.

  • Erik

    Bill,

    the 3% down was not “advice” for how much of a down payment you should put down on a house. It was merely stating that right now, you need AT LEAST a 3% down payment if you want to even consider buying a house. FHA requires at least 3% down, and NO ONE is handing out 100% financing loans anymore. I hope that clarifies my tone for the article.

  • Ben

    Tim, I agree, buying a house is a huge financial commitment and a couple should only purchase a home if they can afford it. My wife and I lived an apartment after we got married, lots of people do. That’s why we started off with tips on finding an affordable apartment.

    Bill, sorry to see you go. What percentage down would you suggest?

  • Bill

    horrible advice….3% downpayment? lol will be removing this blog from GR

  • Tim

    The first points in the newlyweds guide to buying a house should be:

    1. A house isn’t the end all, determine if you can actually afford a house first, if not, then rent. There is no shame in rentin, and owning a house does not somehow make you complete nor is it part of the American dream.

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