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The First-Time Homebuyer's 7 New Year's Resolutions

Dusty Rhodes • January 20, 2020

I love the new year! Starting fresh, getting ready for new opportunities, setting new goals for yourself and your life. There's something so liberating about it. You leave all your baggage behind in the new year with the decorations you take down and store for the next fall and winter. It's an opportunity to start your year off with a clear mind and with a path in sight for this new one. And if you're buying your first house this year, you already know that you're about to experience a whole new chapter of your life! This week, homes.com will be giving us some inspiration on the 7 New Year's resolutions every first-time homebuyer should be setting.


Perhaps the three most serious mistakes most first-time homebuyers make are failing to give themselves enough time to put together a down payment, failing to improve their credit and not paying down as much debt as possible before they start shopping for a home. These can take months to complete, and should they find their dream home, they won’t be in a position to make an offer or get a mortgage.


Many buyers also not give themselves enough time to make a budget for the purchase, including down payment and closing costs and a budget for monthly living expenses afterward to determine what they can reasonably afford. Before they can realistically house hunt, they will need to decide on a list of “must-haves” that includes location, find an excellent real estate agent and find a lender.


If 2020 is to be the year you want to become a homeowner, here are seven New Year’s resolutions that will help you not only buy your first home, but be able to do so comfortably and happily.


Resolution #1. Save for a Down Payment and Closing Costs

Unless you are a veteran who qualifies for a VA mortgage, which requires no down payment, you will need enough cash on hand for a down payment and closing costs. A recent survey found that nearly half of millennial renters who want to become homeowners have not saved a penny towards a down payment, even if you choose a 3% low down payment loan like those offered by Fannie Mae and Freddie Mac, you are going to need $6,000 for a down payment on a $200,000 home. Most young families will need six months or more to save that much. A few lenders offer “zero down” mortgages to first-time buyers, but only to borrowers with excellent credit.


Some first-time are turning to their families for gifts to get them over the down payment hump. These must be gifts, not loans. But lately, the “bank of mom and dad” has been drying up. In 2019, 17.4% of millennials were expecting support, down from 19.1% in 2018. Those who expect help in 2019 are expecting less ($8,928) than they did last year ($9,878).


If you haven’t started saving yet, reduce your living expenses as much as you can and put away as you can with every paycheck. Pay yourself first to make sure you are putting away enough to reach your goals. Don’t save cash by using your credit cards to pay living expenses. You will quickly increase your debt load, which will lower your credit rating. You will also increase your debt-to-income ratio, which could kill your chances of getting a mortgage. Even if you do get approved, you will be offered a higher interest rate.


Closing costs like title insurance, appraisal, settlement fee, home inspection, and lenders’ expenses are beyond your control and are required to be paid at settlement. Most closings these days take place six weeks or so after the seller accepts your offer. Closing costs are generally 5% of the home price, but they vary significantly by state. Here’s a state-by-state list of average closing costs in 2018.


Resolution #2. Reduce your Debt

Lenders look at debt-to-income ratios to see if you will have enough each month to handle a mortgage payment in addition to your monthly debt payments. Your debt-to-income ratio is the of all your monthly debt payments divided by your gross monthly income. The average debt-to-income ratio (DTI) for all recently approved mortgages is 24/37.


You can improve your DTI either by making more money or paying off some of your debt. Review your current debt load and pay off those that have the smallest balances.


Resolution #3. Improve Your Credit Rating.

Your credit score and credit history will also determine whether or not you will get a mortgage and how much interest you will pay. Lenders to whom you apply will pull your credit and carefully review your record. The average credit score for all mortgages is currently about 736.


Credit scores change every month, and you should monitor yours and review your credit history on each of the three major credit bureaus: TransUnion, Experian, and Equifax. If you need to improve your credit, then it should be at the top of your resolution list to do so– here are some tips on improving your credit. Like saving for a down payment and reducing your debt, it takes months to improve your credit. However, you can keep working on your credit until you find a house to buy and apply for a mortgage.


Resolution #4. Get Pre-approved by a Lender.

When you’ve done the best job on your credit and debt, ask a lender to pre-approve you before you to home shopping. With a pre-approval in hand, you will be in better shape to make an offer. If your credit or DTI continues to improve, you may be able to get a new pre-approval for a larger loan.


Resolution #5. Decide Where You Want to Live.

It’s no secret that first-time buyers are facing the worst affordability crisis in decades. Supplies of all homes improved slightly last year, but most economists don’t expect it to get much better and hotter markets may have even fewer homes than last year. Unfortunately, smaller starter homes popular with first-time buyers are harder to find than larger homes.


Inventories and prices vary greatly. Larger coastal metros are the most expensive, but properties in smaller cities are generally more affordable.


If you live in a high priced market, is relocating a possibility? Could you find an excellent job in your field or work virtually? If so, you might surf locations that appeal to you. Check out prices and the supply of affordable homes. You might be surprised at how much reasonable some markets are.


If relocating isn’t in the cards, try to enlarge the areas you would like to live in your current metro. The larger the area you consider, the more listings you will find. If you are moving from an urban rental to am exurb, you might a longer commute will make to become a homeowner faster than staying where you are,


Resolution #6. Make a Realistic Budget for Living in the Home You Buy.

Nearly two-thirds, 68%, of millennial homeowners said they had regrets about their home purchase, and 18% cited unexpected maintenance or hidden costs as their greatest pain point, a Bankrate survey found last year.


Your monthly mortgage is just one of several costs of homeownership. Many first-time buyers fail to plan for insurance, maintenance, taxes, utilities and homeownership association fees are some of the expenses that can strain your family budget. When you decide to make an offer on a home, ask your home inspector for rough estimates of significant repairs or upgrades you will have to make soon. (Better yet, ask the seller to lower the price of the home to cover major expenses, or require him to make the repairs himself). Plan to set aside 1% to 2% of the value of your home each year for upkeep. These expenses, as well as your monthly mortgage payments, will increase with the cost of the home you buy.


If your budget comes in at a level for more than you can comfortably afford, you will have to reduce your mortgage and the amount you can spend to purchase a home.


Resolution #7. Stick to Your Budget.

By making a good budget and sticking to it religiously will save your family from years of living “house poor.” Promise yourself and your family that you will stick to your budget. Don’t assume that the maximum amount that a lender will lend you is the maximum you can afford. His number does not take into account all the expenses you have listed in your budget. It’s merely a number based on your credit score, your debt and don’t get caught in a bidding war for your “dream house” and offer more than you can afford. You may lose the deal but find another house next week that you will like just as much and can also afford.


**BONUS RESOLUTION** Don’t Give Up Easily.

There is no question that these are tough times for first-time buyers. A recent survey found that 12.3% of millennial renters who would like to become homeowners have given up homeownership and plan to rent forever.


After you have given your best effort and can’t find the right house at a price you can afford by the late summer or fall, this might not be your year. Pack it in until 2021. As you continue to save, improve your credit, and reduce your debt, you will be in a better position to buy a home.




Source: homes.com


Dusty Rhodes Properties is the Best Realtor in Myrtle Beach! We do everything in our power to help you find the home of your dreams. With experience, expertise, and passion, we are the perfect partner for you in Myrtle Beach, South Carolina. We love what we do and it shows. With more than 22 years of experience in the field, we know our industry like the back of our hands. There’s no challenge too big or too small, and we dedicate our utmost energy to every project we take on. We search thousands of the active and new listings from Aynor, Carolina Forest, Conway, Garden City Beach, Longs, Loris, Murrells Inlet, Myrtle Beach, North Myrtle Beach, Pawleys Island, and Surfside Beach real estate listings to find the hottest deals just for you!


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The Secret To Selling This Spring: Start the Prep Work Now

By Dusty Rhodes • February 17, 2025
Spring is the busiest season in the housing market. It’s the time of year when buyers are most active – that means it’s when homes sell faster and for top dollar. If you’ve already got a move on your mind, why not list this spring and take advantage of the added buyer demand ? Since spring is just around the corner, now’s the time to start getting your house market-ready. You’ve got just over a month to do the prep work. And while that may sound like a decent amount of time, it’s going to go by quickly. And you won’t want to rush through this important task – especially this year. The Right Repairs Will Matter More This Spring Right now, two things are true. There are more homes on the market than there have been in years. And buyers are being extra selective. That combination means you need to invest some time and effort in making strategic repairs . And many homeowners already have a jump on this work. In the 2025 Outlook for Home Remodeling , Carlos Martin, Director of the Remodeling Futures Program at the Joint Center for Housing Studies of Harvard University , explains : “. . . homeowners are slowly but surely expanding the pace and scope of projects compared to the last couple years.” And the most common projects they’re tackling are replacing water heaters, HVAC units, and flooring. Energy efficiency is a key consideration too, based on home improvement data from the Census. What To Prioritize as You Plan Ahead But just because that’s what other homeowners are doing, it doesn’t mean that’s what you have to tackle. Think about what you’d want to see if you were a buyer. Focus on quick wins that are easy to knock out with the time you have – but, don’t ignore key repairs, especially ones you think could turn off buyers. While big-ticket items like replacing an old roof or outdated flooring may seem daunting, they can pay off – especially if you focus on projects with the best return on investment (ROI). An agent’s expertise is key in narrowing down your list to what’s actually worth it. They know what buyers in your area want and they also have data like this report from Zonda to guide you on which updates have the best ROI ( see green in the graph below ):

41 housing markets where inventory just tipped in favor of buyers

By Dusty Rhodes • February 10, 2025
Among the nation’s 200 largest housing markets, these 41 metro areas now have active inventory at or above 2019 pre-pandemic levels. While homebuyers and home sellers still see headlines about the housing market being a seller’s market and national home prices reaching all-time highs, a deeper look reveals that several regional housing markets have shifted, giving homebuyers some power. During the pandemic housing boom, from summer 2020 to spring 2022, the number of active homes for sale in most housing markets plummeted as homebuyer demand quickly absorbed almost everything that came up for sale. Fast-forward to the current housing market, and the places where active inventory has rebounded to 2019 levels (due to strained affordability suppressing buyer demand) are now the very places where homebuyers hold the most power. At the end of January 2025, national active inventory for sale was still 25% below January 2019 levels. However, more and more regional markets are surpassing that threshold. Among the nation’s 200 largest metro area housing markets, 41 markets ended January 2025 with more active homes for sale than they had in pre-pandemic January 2019. These are the places where homebuyers will be able to find the most leverage or market balance in 2025.

Selling vs. Renting Out Your House: Which Is Right for You?

By Dusty Rhodes • February 3, 2025
Leaving your current house and moving to another one gives you a few options. While most homeowners choose to sell outright, many opt to keep their old home and rent it out instead. This decision can be influenced by several factors: a strong rental market in your area, the advantage of a low current mortgage rate, or challenges in selling the house at the desired price. If you’re wondering whether to sell your house or rent it out, there are a few things to consider. Key Takeaways The answer depends on your circumstances, your housing situation, and your current finances. Selling your house may be the right option if you need the proceeds to purchase your next home or could make a profit. Renting out your house may be the right choice if you’re planning to live in your home again, have a low mortgage rate, or are looking for more income. What are the rental prices in the area? Does it make sense to rent your house? In some locations, rental prices can easily cover your mortgage payments. Depending on how much you have left on your mortgage or if you have a low mortgage rate, the rental income from your old house may cover the monthly payments, plus homeowners insurance and property taxes you pay. However, if you’ve recently purchased your house and are looking to rent it out, your mortgage payments may be too high for a lease to cover them. Take a look at houses that compare to yours with regard to size and location. This should give you a ballpark figure on what price your house can lease for. If you aren’t on a tight timeline to leave your current home, take notice of how quickly similar houses in the area take to lease. If rental properties stay empty for more than a few weeks, you may have trouble finding consistent tenants. A real estate agent can help match you with a tenant or give you an idea of your rental prospects. They can also give you insight into whether your location is desirable for tenants. For instance, if it’s near a university or larger employer, you may be able to rent to students or to employees who relocate for that large employer. However, if the house is far from the city center, or you’re located in a residential neighborhood, you may have trouble finding tenants. Do you need equity from your current home? Why are you leaving your old house? Are you purchasing a new home? If you’re planning to upgrade to a larger home, you may need the money from the sale of your old one to place a down payment on your new house. If you have enough equity in your current home, it may make more sense to sell the house instead of renting it. If you’re able to afford the down payment on your new home without selling your current one, usually about 20%, then renting out your old one makes sense. What is the market like in your area? The housing market isn’t consistent across the country, and even different parts of larger metro areas may be more or less robust. If the current market is slow and you think you can sell your home for a higher price in a few years, then it may make sense to rent the house until housing prices rise again. However, if it’s a sellers’ market and you can get the maximum selling price for your home, then selling it may be the better option. Keep in mind that houses that have been rental properties, often have a harder time selling afterward. You may have more wear and tear in the home if multiple tenants have lived there, which may mean spending more to prepare it to show and sell. An experienced real estate agent in your area can help you determine the top vales of your home and whether or not the current market can support that selling price. Agents who have been in the area long enough to become familiar with the housing market are in a good position to help you determine the best time to sell. Will you live in the house again? Consider whether you plan to live in the house or the area again. You may be in a situation that requires temporary relocation, and you plan to return to the original home in a few years. Having a good tenant to live in the house can ensure that your home stays in good condition instead of sitting empty. You’ll also have income from the rental property and building equity in the old home and your new one. Do you have the time and money to be a landlord? For those who are new to investing in rental properties, it may seem easy to rent out their current home and enjoy passive income while paying down their mortgage. However, if this is your first time being a landlord, you may find leasing your property yourself challenging. First, landlords are responsible for making major repairs to the house. Landlords have to fix things like broken pipes, defunct HVAC systems, and structural damage, among other essential repairs. If you don’t have a few thousand dollars on hand to take care of these repairs, you could end up in a bind. There are specific laws in place to protect tenants, including the landlord’s reliability to make major repairs on the house. In addition, there are certain things that you can and can’t do as a landlord. Being aware of Fair Housing Laws is critical to make sure that you don’t inadvertently violate them. Do you need a property manager? A property management company can help vet tenants, collect rents, and arrange for repairs and maintenance on your behalf. A good property management company is also up-to-date on current requirements in your state for landlord obligations. If you’re planning to just lease your house, you may choose to manage the repairs and tenant search yourself, especially if you live nearby. However, if you’re planning to build a portfolio of rental properties, then having one company manage them may be a better option. Property managers can help ensure that your house or houses stay full, including working with local agents, having open houses for prospective tenants, and quickly running background and credit checks for those applying for a lease. As a passive landlord in this situation, you’re able to free yourself of the obligation for emergency repairs and the time searching for people to live in your rental property. Consider rent-to-own Another option when you’re considering whether to sell or rent your house is to engage in a rent-to-own agreement. In these situations, the tenant will place a down payment on the house and make lease payments to you for a specified period. After the lease is up, then the tenant has the option to purchase the home. During the time they’re making lease payments, a portion of those payments will go toward the final price of the house. This option may work for you if the housing market in your area is stagnant, allowing you to cover the mortgage without entering into a long-term obligation to a rental property. These rent-to-own options can be beneficial for tenants, too, as their financial situation may improve enough over time that they’re able to obtain a mortgage. What makes a house a good rental property investment? Does your house have the potential to be a good income property? There are a few things to consider before listing your house for rent. You may have to make some minor repairs and upgrades to your property to attract good tenants who will take care of the house and pay on time. Fresh paint and carpet are usually a must and are required in some areas. The location of your investment property is one of the most important things in determining whether you’ll have steady tenants or be responsible for covering the mortgage out of pocket if the house sits empty. The home’s location can easily make the difference between having a steady tenancy and losing money on the rental property. Final thoughts on renting or selling your home Deciding whether to sell your house or rent depends on carefully analyzing the area and the property’s desirability. Will the area be in high demand for renters, or is it likely that you’ll struggle to find tenants? You’ll also need to take a look at your finances and determine if selling or renting will give you the best return on your investment. Choosing the right real estate agent to advise you in this process can help you answer your question of whether to sell or rent your house.
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