What buying a house on a tight budget looks like
Buying a house just about anywhere in America is extremely difficult right now. With so much competition and so few houses, budgeting for a home is harder than it’s been in a long time. Fortunately, not all hope is lost. Here are some questions many first-time home buyers have about what buying a house on a tight budget looks like.
Should I hire a real estate agent when buying a house?
Yes, especially now. Hiring a real estate agent is one of the most effective ways of buying a house on a tight budget for several reasons.
First, competition is cutthroat right now. Between older buyers looking for something smaller, cash-paying investors looking to rent or flip, and constantly low inventory, you need someone who can fight to help you find a home. A good real estate agent can help you avoid dead ends, stay realistic and positive, and negotiate.
Second, buying a house is emotional under normal circumstances. In an extreme seller’s market like now, it’s too easy to get frustrated and upset when someone else outbids you. Trying to make life-changing decisions under heavy emotional stress often leads to mistakes and regrets. A good real estate agent can help you stay cool, calm, and collected regardless of your outcome.
Third, a good real estate agent can help you maximize the time and money you have for buying a house. Without an expert in your corner, you may get distracted and waste time on unrealistic expectations.
Should I waive inspections?
Generally, no. A current trend among buyers—especially younger, first-time home buyers—is to waive inspections in the hope that it will entice sellers to accept their offer. If you’re on a tight budget, you’re often better off waiting on buying a house than waiving inspections.
Waiving an inspection can be catastrophic if the home has severe underlying problems. In this market, buyers are often paying above asking price for a home. If there’s something wrong with the home and you’ve waived an inspection, you’re now entirely your problem. Problems like mold, foundation issues, and septic issues can drain your savings or worse, make the home unlivable.
How do I know if I have enough to afford buying a house?
It’s one thing to know whether you can afford a down payment. It’s another, more useful thing to know whether you can afford everything else that goes along with buying a house.
A good way to know whether you can afford buying a house is to take the time to parse your expenses out. We like to recommend that you set up a simple Excel sheet that shows your estimated income against your estimated monthly expenses. You can then more accurately predict how much money you have left over every month (or how far in the red you are).
For a deeper dive on some of the less obvious costs of home ownership, check out our article, “10 Expenses Every Homeowner Should Expect.”
What if I can’t afford a conventional mortgage loan?
Assuming you aren’t a cash buyer (most people aren’t), you’ll need to take out a mortgage. But not all buyers can afford to pay a 20% down payment for a conventional loan. Fortunately, there are options, such as FHA loans and VA loans (read more about them here).
How much does home maintenance cost?
The rule of thumb with home maintenance is that you’ll spend about 1% of your purchase price a year. So, for a $400,000 home, you’ll pay somewhere around $4,000 in a normal year. Fortunately, this is where 2-10 Home Buyers Warranty (2-10 HBW) can really help you, especially if you’re on a tight budget.
Even with proper maintenance, important home systems and appliances will break down. And repairing or replacing major systems and appliances can be extremely expensive. Plus, when you’re in a new neighborhood, you might not know whom to call or trust to fix your breakdown.
With a home warranty from 2-10 HBW, you have an easier, more affordable solution.
A home warranty can protect your budget against unexpected, out-of-pocket costs. It can put you in touch with local, quality contractors. And it comes with exclusive perks, like our Appliance Discount Program, which gives you up to 65% off GE and Whirlpool brand appliances.
2-10 HBW offers the most comprehensive home warranty coverage for homeowners. Let us help you protect your home.