If you’re dreaming of buying a home this year, start by connecting with us at River Cliff Homes to understand what goes into the process of building a home with our Build On Demand building program. With a trusted building team at your side, you can then begin to answer the questions below to set yourself up for home buying success.
1. How Can I Better Understand the Process, and How Much Can I Afford? The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.
Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. If your financial situation has changed recently, be sure to discuss that with your lender as well. Most builders have loan officers they trust and will provide referrals for you.
2. What type of home can I afford?
There are generally three types of builders; custom home builders, production builders and spec home builders. Custom builders require that you own your lot and you hire the builder to build your home. This type of build requires two loans; a mortgage loan and a construction loan. This is the most expensive building process for the buyer. Production builders offer lot and home packages in their developments. This is high density housing with zero lot lines. Spec home builders, like River Cliff Homes, purchase lots in different subdivisions and can offer a variety of options for the buyer. River Cliff Homes allows their buyers to choose a lot from their lot inventory, a floor plan from their numerous floor plans and the elevation style their buyers prefer. Best of all the buyer never has to pay for two loans. River Cliff Homes only requires a mortgage letter from the buyers lender to build a home. This building process is called "Build On Demand" see below:
2. How Much Do I Need for a Down Payment? In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down. If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says:
“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”
Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process.
3. Saving Takes Time: Practice Living on a Budget As tempting as it is to pass the extra time you may be spending at home these days with a little retail therapy, putting that extra money toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score.
A survey of millennial spending shows, “68% reported that shelter in place orders helped them save for their down payment.” Danielle Hale, Chief Economist at realtor.com, also notes:
"If there is any silver lining to the current economic landscape, it's that mortgage rates are hanging around record lows…Additionally, shelter-in-place orders helped many who were fortunate enough to keep their jobs save for a down payment -- one of the largest hurdles of buying a home. The combination of low rates and the opportunity to save is enabling many millennials to move up their home buying timeline."
While you don’t need to cut all of the extras out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.
Bottom Line If homeownership is on your dream list this year, let's take a good look at what you can prioritize to help you get there.