by Marc Hedlund, FMR Director | 03 Oct, 2022
House prices are rising, but that’s nothing new. They always have been! It’s true that prices in our area have steadily risen over the last 20 years. It wasn’t until recently, with low rates and even lower inventory, that prices went up more than normal. Finding an affordable home can be tough, especially if you are a ï¬rst-time home buyer. However, we’ve put together a list of expert tips to hopefully make finding an affordable home in your budget a rewarding and fulfilling experience.
Find Your Budget (And Stick To It!)
Getting pre-approved with a loan officer at a bank is THE best way to ï¬nd out what your budget should be and what you can afford. With things like taxes and specials, a $250,000 home in one neighborhood may be more affordable than a $250,000 home in another. How is that? Well, taxes and special assessments will vary depending on specific cities or even neighborhoods. These factors will affect your monthly payment.
For example:
A $250,000 home with no special assessments will have a lower monthly payment than a home that is the same price but has $35,000 in specials. The reason is, those specials are paid off monthly just like your mortgage and taxes are paid. Having this discussion with a lender and your REALTOR® will help you in understanding the difference and why.
Once you have established your baseline monthly payment with your loan officer, it is always a great idea (before putting in an offer) to send them the address of the home you are interested in to make sure your payment will work within your budget.
Know The Most Affordable Options
Twin Homes
Twin homes are a great way to save money while getting into a home for a lot less than you would pay for a single family home. Being open to a twin home greatly expands your options in the Fargo-Moorhead (FM) market.
Twin homes in the FM area have proven to be a solid investment for years. They have shown great appreciation over time and have allowed many people a first step into home ownership.
Pros:
• Larger option of homes to choose from
• No condo fees or HOA rules
• Financing may be easier to obtain
• Lower property taxes
Cons:
• Shared backyard
• Shared interior wall
• Many have similar layouts
Look in an Older Neighborhood
Older neighborhoods can vary greatly in home cost. Some older neighborhoods are full of million dollar historic builds, while others have great affordable options. That's why it's important to keep your options open.
Some older homes will not qualify for certain financing types. It is important to work closely with a REALTOR® and a loan officer that knows what to look for. Older homes may get flagged by appraisers during the home buying process and could slow or even kill a deal. Make sure, if you are using FHA/VA/USDA financing, that you have a clear understanding of what appraisal issues could come up.
Pros:
• Older homes of a similar size typically cost less than their newer counterparts
• Wider variety of home styles and sizes
• Typically a better long-term investment
• Limited supply and may attract future buyers looking for a house with “charm”
Cons:
• Can have higher energy costs due to inefficient insulation and plumbing
• Tend to have less storage space than newer homes
• Typically need more yard maintenance
Consider a Fixer-Upper
Your REALTOR® can help you decide what is actually fixable and something you should be avoiding. It never hurts to make an offer on a fixer upper because every home sale needs to go through an inspection (unless it's waived, but we never recommend this). Your inspector will give you a detailed list of the home's current condition as well as any potential hazards or issues.
IMPORTANT: Never go with a subpar home inspector. If you're saving money on a fixer upper, you should be splurging on the best home inspector possible. This can save you THOUSANDS in the long run.
Pros:
• Lower initial purchase price
• More freedom to make the house your own
• Hidden gems - many fixer-uppers are quality homes that just weren’t maintained
Cons:
• Potential hidden issues - fixer uppers can come with the gamble of finding larger issues after renovation starts.
• Renovations can be very expensive, especially with recent inflations
• Can leave you living in a construction site for an extended period of time
Conclusion
While all of the tips above can help you find an affordable home, never forget the most important parts of the homebuying experience: find a dependable lender, a knowledgeable REALTOR®, and a trustworthy home inspector! Doing these three things alone will make the entire process easier and more affordable.
Marc Hedlund
FMR Director
EXIT Realty Metro
