According to Zillow, the average price of a home in America is $257,990 (as of publishing this blog post). Some families barely make that amount of money in ten years. Mortgage down payments typically sit between 5% and 20% of a property’s value. That could still mean saving up roughly $12,000, which is no easy feat for most people.
But of course this is all averages. Getting on the property ladder can be much less of a mission if you shop around strategically. Being young and a first-time-buyer has its advantages when buying property – most people just aren’t aware of the tricks. Here are just a few of those tricks to get onto the property ladder (by taking advantage of most of them, it’s possible you could grab a property for no more than a grand!).
Save up for a down payment strategically
Saving up for a down payment is always going to be difficult, but you can speed up the process by investing wisely. Don’t just use a regular savings account – certificates of deposits are some of the highest interest savings account, some offering a 3% return as can be found on Money Rates. You could even invest some of your money using a low-risk method such as peer-to-peer lending. This involves giving your money out as a loan to someone else – this is paid back to you with interest allowing you to make a tidy profit.
Take all steps to find the cheapest mortgage
Whilst 5% is the lowest some mortgage lenders will go when it comes to a down payment, there are a few lenders out there that will go even lower providing you meet certain specs. In fact, there are even some mortgage dealers out there that have no deposit at all. Meeting the requirements for these loans isn’t easy – you need to have immaculate credit score in most cases and it helps to be young and on a good income.
You should spend a lot of time shopping around in order to find the best deals out there. Mortgage broker services such as Altrua Financial could be worth using – some of these brokers have access to deals that you won’t find elsewhere on the market. Some brokers may charge commission, whilst others can offer advice for free.
Use other borrowing methods
There may be other ways of borrowing money to put towards a property. You may be able to borrow money from family members for a down payment – this money may have no interest at all.
Alternatively, you may be able to take out an entire mortgage on a peer-to-peer lending site. This could be worthwhile looking into if conventional mortgage lenders aren’t accepting you due to a low credit rating, however you could end up paying a lot of interest as a condition.
Consider the location
If you’re not fussy about where you live, you may be able to lower costs considerably. The average price of an apartment in Manhattan may be close to $2 million, but move to Cleveland in Ohio and you can buy a four-bedroom two-bathroom house for an average price of $64,000.
Of course, most people have commitments keeping them tied to a place, or at the very least may want to live somewhere where there are enough job prospects and social opportunities. Prices are often cheaper in rural towns and on the suburbs of cities. Often factors like a high crime rate, low occupancy, high storm/flood risks, noise pollution and pest problems can bring down the value of a property – these are all factors to look into if an area’s property prices seem unusually low, as a lower price may not be worth these sacrifices.
Consider a self-build
Building your own home might seem like a preposterous idea, but it can sometimes be cheaper than buying property that’s already built. Not only can you use cost-cutting building methods, you might be able to add in features like insulation and solar panels that could lower your living costs considerably. You can take out a specialist self-build mortgage to cover the costs. Down payments can be a little higher on these mortgages, which is the downside. Another factor to consider is the cost of land, which is likely to not be covered by a mortgage. That said, there are separate land-buying loans.
Consider an ‘as is’ property
You may find some cheap properties advertised ‘as is’. These are popular on auction sites and are sometimes extremely cheap. The condition is that they may not be in a liveable state – whilst most properties have to be done up to a certain standard to be sold, these properties are often heavily damaged and it is your job to then pay for the repairs needed. This could include anything from smashed windows to a hole in the roof. Buying ‘as is’ can be a gamble, although those that are smart about it may be able to find cheap ways to do the place up and spend much less overall than were they to buy a home in good repair.
Consider alternative properties
Most of us think of homes as houses and apartments, but there may be other options out there for those wanting to own a home.
Container homes are a popular option. Shipping containers generally cost no more than $4000. The cost of transporting these containers and renovating them is the big cost, but overall it’s likely to be a fraction of the cost of a home.
There’s then the option to live on a houseboat. These can often be a great way of living in a city centre on a budget with some costing only $100,000. You can take out a loan to buy these boats, which can act like a mortgage. Of course there are some hidden costs like mooring and licensing, but overall costs can still work out cheaper than other property.
Split the cost with friend
Buying property alone is always going to be a challenge. An easy way to bring down costs is to split it. This could be with a partner or with a group of friends. Alternatively, if you can afford the down payment, but think you’ll struggle to pay the monthly mortgage rates, you could take in a lodger who can help pay you rent towards the mortgage. The more people involved, the cheaper the costs will be for you.