Money Rehab with Nicole Lapin - 5 Pro Tips for Wannabe Homebuyers

Episode Date: September 25, 2023

If you’re caught up on your Money Rehab, you know that right now is… not an awesome time to buy a house. But if you are house-hunting like it’s your full-time job (because honestly, house-hunting is), here are five things you can do to give yourself every advantage. Nicole's favorite episode on improving your credit score here: https://link.chtbl.com/oCPZ_69L To invest towards your down payment, meet your investing assistant Magnifi at moneyassistant.com

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. Well, if you've caught up on your money rehab, you know that right now is not an awesome time to buy a house. But if you're house hunting like it's your full-time job, because honestly, house hunting is, here are five things you can do to give yourself every advantage. Number one, look for an assumable mortgage. This is my new favorite housing hack,

but it's a bit of a treasure hunt. So WTF is an assumable mortgage? Simply, an assumable mortgage is a type of mortgage where a buyer can take over an existing mortgage on a property, which is great for buyers because they essentially grandfather in a mortgage with an older, lower rate. But the buyer, of course, still needs to also pay the seller the amount the seller has already paid in, which they can do in cash or a second mortgage, which will be at the current interest rate. Now, I'll be honest, assumable mortgages are like unicorns of real estate right now. They're pretty rare and can be difficult to find. The best method for finding an assumable mortgage is to include assumable in a keyword search on Zillow or whatever real estate marketplace you're using. Or if you're working with a real estate expert, let them know that that's something on your wish

list. Number two, get a mortgage broker. Navigating the loan application process is not funsies. And if you're having trouble, a mortgage broker could be right for you. Obviously, check to make sure that person isn't sketchy. But when I was house hunting, I used one who found the best deal for my needs, and the lender paid the commission. In other words, many mortgage brokers are totally free to you, and whichever mortgage you end up putting a ring on, they pay your mortgage broker. 3. Cozy up to your state. If this is your first home purchase rodeo, your state will probably offer you some perks. This varies state by state, but there are two popular programs for

first-time homebuyers. One is a break on the interest rate, which is the best kind of deal you can score in real estate land right now. The second is a low down payment requirement, and I'm talking very, very low, like to the tune of one to three percent down. Now, just because you can put such a small down payment down doesn't mean you should. That means that you're going to have to take out a mortgage for 97 to 99 percent of the price of the house. And I know we make mortgages sound super sexy because it means we're a homeowner and we're successfully adulting. But remember, a mortgage is debt. A rose by any other name is still a rose and debt by any other name is still freaking debt. Number four, spruce up your credit score. Your credit score is going to be hugely important in your home search. It will

determine your mortgage rates and if you get a house at all. So now is the time to make sure your credit score is in tip top shape. To do that, the first thing I would check is your utilization score. That's just the finance term to express how much of your credit line you're using. Your credit score will be really happy if your utilization score is 30% or lower. So if you have a $5,000 credit line on your credit card, you shouldn't really be spending more than $1,500. I have a bunch of best practices for glowing up your credit score that I've talked about a lot on the show, and I've linked my favorite episodes in the show notes. Number five. Don't save your down payment, invest it. If you're buying a house, the tried and true

recommendation is that you put 20% of the home price as the down payment. And when people hear that, they're often like, that is so much money, how am I supposed to save that much? My answer, don't save it, invest it. Say you wanna buy a home in five years and you need 100 grand as a down payment. If you planned on achieving that through savings, you'd need to obviously put away 20 grand a year, and that is a lot of money to just scroll away year by year.

But if you took a one-time lump sum of $20,000 and used an investing strategy to meet your down payment goal, based on historical performance of the stock market, you could achieve that 100 grand goal in five years by just contributing $12,000 every year. I know $12,000 is still a lot, but the magic here is that when you invest you create wealth so you can reach your goal without every dime coming out of your bank account now of course nothing is guaranteed when you're investing in the stock market and if you have that dream of buying a home five years from now when the stock market dips that year you'll need to push back your home ownership timeline so what i'd recommend is a hybrid approach where you grow your nest egg in a

high yield savings account and a smart investment portfolio. With a smart investment portfolio, you can manage risk and set yourself up for the best chance of success. And if you want some help making a portfolio, Magnify, one of my favorite money apps, is an AI investing assistant. It can help you make a portfolio specifically geared toward a down payment goal in 5 minutes or less. You can get started today at Money Assistant.com. For today's tip, you can take straight to the bank. There is no shame in the renting

game. Seriously, right now I am renting. Loud and proud. You want your house to be an asset, not a liability. So if you find a property that you think is going to appreciate and you'll make a return, awesome. But with these interest rates, you might be better off renting, taking that extra money and earning 8% in the market instead of spending 8% on your mortgage. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Money Rehab's executive producer is Morgan Levoy. Our researcher is Emily Holmes. Do you need some money rehab? And let's be honest, we all do. So email us your money questions, moneyrehabatmoneynewsnetwork.com to potentially have your questions answered on the show or even have a one-on-one intervention with me.

And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. No, seriously, thank you. Thank you for listening and for investing in yourself, which is the most important investment you can make.