What are you afraid of? What’s holding you back from realizing your potential, your dreams? I know for me, a lack of knowledge can give me pause and make me push away a realizable idea simply because my confidence isn’t there. Once I have the knowledge, though, I have all the confidence in the world. Thinking that many of you have, will, or are experiencing something similar, I’ve decided to start a little fear series in regards to home buying and selling to help give you some tidbits of knowledge--and therefore confidence--in making your next move.
The common theme I’ve heard over the past few weeks of talking with clients is overwhelmingly, fear….and for good reason! Buying or selling a home is one of the biggest, most stressful tasks we take on in this life. The fear I’d like to address today is the fear of not having enough money to buy a home. Over the next few weeks I’ll address the fears of debt, moving, the unknown, and risk-taking.
We can’t do anything without it, right? Wrong! 😉 I’m of the hippy/free-spirited opinion that with the right mindset and work ethic, you can have anything you want. However, that’s not the topic of today’s blog, so let me be more concrete: if you want to buy a house but you don’t have the money, I can find you the money. Seriously.
Many people won’t even entertain the thought of buying a house because they don’t have money in the bank for a down payment. If that’s you, guess what? MSHDA (Michigan State Housing Development Authority) has a wonderful down payment assistance program in which they will loan you the money for a down payment. Want specifics on that? Hit me up and I’ll hook you up with Jason--one of my lenders who can work magic in this arena. (I actually utilized this service myself when I bought my first home. Painless. 😁). Secondly, many people are under the impression that they need 20% down to buy a home. Not true! 🙌🏻 You actually only need 3% for a conventional loan and 3.5% for an FHA loan. Shoot, if you are a vet, you don’t even need any money down! Now of course, putting less down comes at a cost, but it’s very minimal given the financial context of a home purchase. If you use a conventional loan and put less than 20% down, you will need to pay for mortgage insurance (PMI) until you’ve built up 20% equity in the home. PMI helps mitigate the lender’s risk of loaning money to someone with little skin in the game. But in my opinion, it’s totally worth it to not have to acquire or relinquish that much liquid capital. If you want more information on this, I’ll hook you up with Steve, another lender of mine who excels at matching the right loan to the individual buyer.
Another aspect of home buying that many people say they don’t have money for is the closing costs. On top of needing money to put toward the purchase price of the home, you also need some money to obtain the mortgage and the title to the house. Don’t have the money to close? I gotchu! We can offer a few grand more on the home and then ask the seller to pay for closing costs. So in reality, the seller isn’t paying anything….we all just break even. Win-win. Of course, the home has to appraise for the additional money, but a few grand is pretty easy to cover. 😉 (I personally utilized this strategy as well when I purchased my second home. 😜)
Earnest Money Deposit
But what about the earnest money deposit? You might have heard that you have to put up approximately 1% of the purchase price as a deposit when you make an offer on a home. Actually….that’s a myth. Is it standard practice? Yes, absolutely. Most buyers do put down an EMD simply so their offer can look more attractive. However, it is NOT required. We just think it’s required because it’s what everyone does all the time. So if you don’t have 1% to fork over right away, don’t sweat it.
Finally, inspection costs. This is another aspect of buying a home that is not required; HOWEVER, I would NOT skip the inspection if I were you. I’d do whatever I needed to do to get approximately $500 (could be less) for an inspection before purchasing a home. But seriously guys…if you’ve been able to move past all the aforementioned points but you just can’t muster up $500 for an inspection, I gotchu here too. If owning a home is your dream and $500 is about to break you, we will just take that money out of my commission check and I’ll cover it for you. No sense in letting a little inspection fee stop us from making the sale happen. 😉 (Oh, and speaking of commission, did you know that as a buyer, you don’t pay me a dime? That’s right...all commission is paid by the seller! 🙃)
Alright guys, that’s it for today. Next week we will talk about debt. I know I didn’t address the seller side of the money equation today, but you’ll hear about that in part five of this series. As always, hit me up with any and all questions. If I don’t know the answer, I’ll surely find it for you.