Mortgage expert Holden Lewis offers some tips for budget-friendly homebuyers.

<div class="block">Mortgage expert Holden Lewis offers some tips for budget-friendly homebuyers.</div>
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Stretching Your Dollar

Budget-Friendly Tips for First-Time Homebuyers

Welcome back to stretching your dollar on Cheddar News. I'm Christian Scher here at the stock exchange. Despite an early pandemic boom in the housing market inventory and affordability remain a challenge. The shortage of homes on the market and high borrowing costs have pushed prices even higher with a typical US home value exceeding $350,000 for the first time in history. That's according to the Zillow market report. Joining me now is Holden Lewis Home and mortgage expert at Nerd Wallet on how first time home buyers can navigate this market. Holden, what's the first thing a potential first time buyer should consider when looking at a home? All right. So the first thing they should consider is affordability. You know, the the biggest mistake that first time home buyers make is paying more than they can comfortably afford for a home. So, you know, the best thing to do is go to a mortgage calculator, like the ones that Nerdwallet offers and it takes into account your income, your debts, uh all that kind of stuff and um you know, current mortgage rates and it kind of gives you a range of, of the price, the home price that you should shop for? Ok, I like that. That's really good advice. Let the calculator do it for you. That's always convenient. So credit scores obviously factor into this. What if your credit is not as strong as it should be? But you can still afford a mortgage. What should you do in that essence? I mean, should you try to raise that credit score or are there other options that you can pursue? It's really a judgment call and you can buy the house now and pay a higher mortgage rate than someone with a really high credit score. And then in a few years hope that you raise your credit score and mortgage rates go down both of those things. Um, you know, they're, they're, they're likely to happen probably or you can we build that credit score even higher, you know, the the risk that you run if you do that, of course, is that home prices could continue to rise. So it's really just kind of one of those things that you just got to kind of weigh and make your own decision. There's not, there's not really a just kind of a prepared answer to that. Ok. Obviously insurance and potential out of pocket costs like a fees are part of the equation as well. How do those factor in and how much should you expect to pay? Oh man, I tell you, you know, insurance especially it varies so much. The thing to do is that when you're shopping homes, have your agent ask how much the current homeowner pays for ho a fees and insurance and property taxes and just make sure that you incorporate those things into your monthly, uh, affordability. What's the biggest mistake that first time buyers make? The biggest mistake is over paying for a house. And you know what happens is like, they can technically afford the house, but then they're really stretching far and they're finding out that like, oh, ok. Well, they're gonna have to get the second best day care instead of the best day care that they're going to have to, you know, not get the car that they want scrimp on vacations. And so it's really important to really think about how your house payment fits into your whole life and what you want to do with it. What about a fixer upper or even a home in foreclosure? How should a first time buyer approach those properties? Hey, you know, if, if you're really up to doing the work, buying a fixer upper is just fine. Here's something to keep in mind. There's really a difference between a fixer upper and an outdated home. And a lot of people look at those things and kind of think they're the same, but a fixer upper. It needs a lot of work just to make the house comfortable and safe. Whereas there are a lot of outdated homes out there, like they're being sold by Boomers. Right? And maybe the house has really good bones. There's not any problems with the roof or the air conditioning, but just the carpets and the paint and the cabinets are really outdated. Those can be a really, really good deal because you can buy that and relatively inexpensively, relatively compared to buying a fixer upper, you can make that house the way you want, it, rip those carpets up, refinish the floors, paint the walls, that sort of thing. Uh Rent to home, is that something that people should look into rent to own? Hey, you know that, that, that is a way to buy a house. Not a whole lot of people do it, it is pretty complicated. It's also called lease purchase and it works like this, you sign a contract that you're gonna rent the house for a certain period, say 1 to 3 years usually and you pay the market rent on that and then you pay extra on top of that every month and that extra goes toward your down payment. And then at the end of the rental period, you apply that down payment money to it and you buy the house and that can help you build up your credit score in the meantime. So, you know, it's a way to people buy houses. I would suggest getting an attorney involved before you sign that contract and um and just making sure that the owner, the landlord really has clear title to it and will be able to actually sell it. All right, Holden Lewis, thank you for joining with the tips that we all need.