Stop Telling Yourself These 3 Lies Keeping You From Buying a House

I think it is safe to say that the secrets out... buying a home in the Greater Seattle-Tacoma area is not as difficult and pointless as some make it out to be!

Pretend you buy a 3 Bedroom, 2 Bathroom house in Federal Way for $345,000.

You apply and get a 30-year mortgage, with a typical interest rate, so your monthly mortgage payment is $2,400.

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So since your mortgage is for 30 years, you will be paying the bank that same $2,400 each month, for 30 years.

When you break the numbers down, you are paying almost $29K per year and over $860K over that 30 years:

- Total of mortgage payments every year: $28,800 ($2,400 x 12 Months)

- Total of all mortgage payments after 30 years: $864K ($2,400 x 360 Months)

That may sound like a ridiculous amount, but let’s consider the cost to RENT that same home in Federal Way.

Last month in Federal Way, 3 Bedroom, 2 Bathroom homes rented for $2,652 on average, according to Northwest MLS data.

This translates to over $31K per year in rent payments and over $955K over those same 30 years!

So while it's rare that anyone would rent the same house for 30 years, I hope you understand the point I am making here: it costs more to rent than it does to own.

Here are a few lies that too many hopeful homeowners tell themselves -- keeping them in the dark about how close they really are!

1. “I don’t have enough money for the down payment. I need 20%”

I can’t tell you how many people I speak with that STILL think they need like $18K in cash for a down payment.

The good news is, you don’t. Probably not even half…

Don’t get me wrong, it will definitely help if you have that much cash at your disposal, because essentially the more you put down, the less you have to pay back.

But as far as having enough cash to qualify for a mortgage with a decent monthly mortgage payment – it is much easier than many of you reading this might think.

There are SO many homebuyer programs available to buyers these days.

I’ve been telling my friends and family about how excited I am about my brand new Down Payment Resource Center!

I launched this specifically for those of you who might be considering purchasing a home in Federal Way, or somewhere else in the Greater Seattle-Tacoma area, within the next 2+ years (or sooner)!

This convenient tool will cost you nothing but 45 seconds of your time to get a list of every single mortgage program that you qualify for.

Your information is completely confidential and the tool is guaranteed to give you some insight into what your next step should be if nothing else.

Use some retirement funds (especially if you’re under 40!)

Most people don’t know that you can use funds from your retirement account to buy a house.

I know, I know... money from your retirement account is supposed to be used when you are in retirement age…

But hear me out: many retirement accounts allow a few special exceptions in using your retirement money; before you hit retirement age….and buying a house is one of those exceptions.

Like some of my friends, you might have somewhere around $10K-$15K just sitting in a retirement account. And that is great! By all means, GET that compound interest and that company match of up to 6%!

But what if you could increase your return on investment and diversify your retirement nest egg?

I was recently explaining to one of those same friends that, for just a small fraction of that $15K sitting in her 401(k) account, she could buy a house. Which is an asset that will make her nearly a 6-figure profit in the same long timeframe (if she buys the right one, of course).

For many, purchasing real estate is a much better long-term investment option than an IRA or 401(k). This is because real estate values have ALWAYS increased in value, over the long term.

Appreciation’s Impact

In real estate, the term appreciation refers to the increase in the value of a property over time. Appreciation may result from inflation, increased job opportunities in your market, and overall development in your town.

You can also increase the value of a property with home improvements, which can compound the impact that these market forces have on the appreciation of the home. More on that shortly.

According to this chart that I borrowed from @charliebiello, history tells us that since 1891, on average homes tend to appreciate by approximately 3% over the long term.

So going back to our Federal Way house:

We already determined that you’ll pay a total of $864K over the span of your 30-year mortgage.

BUT adjusted for appreciation, your $345K home will be worth an estimated $970K by the time you make your final mortgage payment.

That is more than the $955K you would have paid in rent in that same 30-year time period.

That sounded crazy even to me at first, so I had to go and find an example. It didn’t take me long.

Take a look at this house that just sold in Tacoma:

This house sold for $375K, which is almost 20% above the asking price. Not only that, back in 1983, this same house sold for just $50,008!

Doing the math, we can see that the 3% average appreciation rule more than applies here!

2. “I have to work on my credit a little bit more first…”

This, like the first lie many hopeful buyers tell themselves, is understandable.

Personally, as someone who had almost $60,000 in student loan debt, some bad credit card debt, and a very subpar credit score when I purchased my first home, I thought the opportunity of homeownership was YEARS ahead of me.

But I was completely wrong about what I thought was required.

And I would have never known I was wrong if I didn’t approach my conversation with my loan officer with the mentality of “If nothing else, I will know where I stand, and will know what to do next.”

The first thing I advise anyone considering their home buying options to do is to speak with a loan officer to find out where they stand.

That way, if they are thinking of buying a home at some point soon, they will know exactly what they need to do to qualify to get the home they want when it is time to start shopping.

If you need to boost your credit score by 65 points or pay down a $10,000 collection debt to qualify for a home loan, you would want to know that as soon as possible, so that you can map out a clear game plan to address these things and hit the ground running when it is time to shop.

You can only know for sure where you stand if you speak with a loan officer.

For my real estate sales business, I send all of my buyer clients to Shelan Maxey over at Bay Equity.

Like any top loan officer should, Shelan makes sure all of my clients are well aware of their mortgage options, and she helps them lay out a clear pathway to homeownership, based on their desired timeline and finances.

She is great about pointing out areas of improvement for my buyers, so that they can qualify for a better interest rate or higher loan amount, by the time they are ready to start packing up to move, months later.

There is no magic credit score or the perfect number to determine if you are ready to speak with a loan officer about your buying options. If you take action early and find out where you stand, you will be much better prepared to make your move when it is time.

You want to give yourself time to improve your credit if that is truly something that is going to hold you back. You won’t truly know how your credit impacts your ability to buy until you take the first step!

3. “I’ll just rent until the market crashes”

I also have a few friends that have told me that the reason they haven’t looked into owning their home is that they plan on “buying low” when the market crashes.

My first question to them is always “Well, when is THAT going to be?”

Nobody can time the real estate market. Yes, the real estate market is cyclical – it goes through its “ebbs and flows” over time. The problem is, nobody can tell when to expect the market to “ebb”, and when to expect a “flow”.

I’m not saying the market won’t crash, because again, nobody can time the market – but what if you’re waiting and the market takes over 30 years to crash? Or even 10 years?

I listed this as the third “lie” on our list because most people wouldn’t truthfully say they want to wait a whole decade to enjoy the comfort and pride of homeownership, especially if they are in a position to purchase NOW.

Not only that, consider what we learned above. You’ll end up paying almost $1M in rent over 30 years, in the same amount of time you could have been an owner and increasing your net worth for each of those 30 years instead!

I tell people the best time to start the home buying process is when you have nothing in order yet, and you don’t think you are ready. As funny as that might sound, it’s TRUE.

This is because you don’t actually know how ready you are until you get to the table with your loan officer.

So many people start out seeing the home buying process as intimidating, stressful, scary, and something to avoid.

But really, the earlier you take that first step in seeing where you stand, the sooner you realize this process is none of those things.

Contact me today if you are considering your home buying options. You don’t want to let this month end without finally finding out where you stand.

Here is another link to the Down Payment Resource Center! Here's another link to Shelan Maxey's Mortgage Application Page. Don't wait another day to find out what mortgage program suits you best!