It’s no secret that purchasing a home is a major financial undertaking, even more so when it is your dream home. At a higher price point, thanks to brand new fixtures and the perfect location, it may feel totally out of your reach. Add the costs of raising children, and it can feel downright impossible.
You may be surprised to learn, however, that there are many things you can do to make your dream home a financial reality, whether you leverage non-traditional loan options or rent to own. You can buy your dream home on a military budget. Use these five ideas to buy your dream home once and for all.
1. Take Advantage of Loan Options
You’re probably well aware that there are several different types of home loans available for home buyers. The tricky part is deciding which type of mortgage loan is right for your budget. Remember that you’re mortgage lender is more than that. As NerdWallet explains:
“Finding a mortgage lender involves more than just getting a good interest rate; you want to work with the best mortgage companies, staffed by professionals who will guide you through the process.”
Typically, first-time buyers choose FHA loans because the of the lower minimum down payment requirement, suggests Zillow. However, there might be a better option for you. For example, military home loans—also known as a Veteran Administration (VA) home loan—is a great option for families in the military.
The benefits of a VA loan are many, most importantly that it comes with a guarantee to lenders, which allow them to offer you more favorable terms, according to the Department of Veteran Affairs, such as:
- You’re not required to pay a down payment unless the lender requires it. You may have to if the purchase price is more than the reasonable value of the property as well.
- There’s no private mortgage insurance (PMI) premium requirement to worry about with a low down payment.
- Your closing costs are limited thanks to specific VA rules.
- You have an option for closing costs to be paid by the seller.
- If you pay the loan off early, you don’t incur a penalty fee.
- If you’re struggling to make payments, the VA may be able to help.
2. Consider a Fixer Upper
If you can’t afford your dream in its dream home state—remodeled, perfect landscaping, etc.—consider a fixer-upper. Unlike other residential properties, fixer-upper prices don’t necessarily follow the trends of the local real estate market, which means you can often get a great deal. While this route can be cheaper, it can be more expensive if you don’t know the tricks of the trade. In Today’s article, What I Wish I’d Known Before Buying a Fixer-Upper House, contributor Patty Lee shares what she wishes she knew, including:
- Vet your contractor thoroughly.
- Stay in regular communication with your contractor and other workers.
- Research to find out what you can DIY and what pros should do.
- Shop around to understand true costs.
- Know what you will and won’t compromise on.
- Be prepared to go over budget.
- Be prepared for delays.
3. Try It Out on the Cheap
If you’re ready to skip town and start fresh somewhere else, consider renting before buying. In doing so, you are able to take the area for a “test drive” before investing in a property that may or may not align with you and your family’s needs.
Look for resources like this Chicago Rent Report, paired with housing costs reports, like this report from HSH, to determine where you’ll get the best bang for your buck—both as you’re saving the money and when you’re ready to sign on the dotted line.
Another option is rent-to-own, which allows you to start making the house your own, before you own it. Most landlords allow painting and other customizations, as long as everything is returned to its original state when you leave. If you don’t plan to leave, you don’t need to worry about that.
4. Make Realistic Compromises
In order to purchase your dream home, you may need to make some compromises. A great place to start is to separate your wish list from your must-haves. For example, as you consider needs versus wants, you might decide that a spare bedroom is more important than a two-car attached garage or a spacious backyard.
As you’re doing this, don’t just think short-term. Consider what you’ll want in the future too. Will you be having more children? Do you have an aging parent? Will you be getting a pet?
These are all important details to consider as you plan for your dream home, especially if you’re stretching yourself to buy it. You don’t want to go through the home buying process just to realize it’s not longer your dream home one year later.
5. Negotiate, Negotiate, Negotiate
Don’t dismiss your dream home just because the price is out of your budget. In many cases, you can negotiate to see if you can talk down the price. This is why it’s important to work with an agent who can do the negotiating for you.
“Even though the cost of an agent might make you consider selling your home yourself, think about what an agent can do for you as a negotiator. Experience, access to the MLS, and knowledge of the marketplace can all lead to a higher negotiated price—in many cases, easily high enough to justify an agent’s fees,” explains experts at State Farm.
Now Go Buy Your Dream Home!
Use these tips and ideas to buy your dream home once and for all. Remember, you can start with renting first if you need to—and the VA has options available for military families that make home buying much more realistic. Use the resources available to you, be ready to make some small compromises, and start packing for moving day.