First Time Home Buyer – 1, 2, 3
What To Do To Plan In The Years Leading Up To Buying Your First HomeWe’ll start with a quick little tip and then we’ll get into first time home buying one, two, three. Here’s a quick credit tip. You guys already go paperless when you buy your movies and your concert tickets. Everyone’s using their phone. Use that tech savvy and all your new-fangled fancy ways, not having a paper in your pocket anymore, you can use that to build up your credit. If you can pay your bills and you can pay your credit card and you can do everything else on your phone right there, then why not, when you’re going to the movies, instead of doing it out of your checking account, your debit account, use your credit card. Use your phone, pay it off a few days later. That responsible usage right there, that’s going to build up history with your credit card. History’s not just a bad class in school. It’s very important to get your credit score high. That’s going to build your history. Show that you’re responsible and they’re for expenditures that you’re already going to make anyway. Be sure not to abuse it. Don’t go out there running around spending your money and saying, “David told me I need to buy more movie tickets.” That’s not what I said. Think of it as stuff I was going to buy any way strategy. If you’re going to buy something anyway, go ahead and put it on a credit card, then pay it off a couple of days later online. You can even make two savings accounts. One auto withdrawal account that pulls money out immediately, so you start doing some savings. The second new savings account is the stuff I was going to buy anyway. That’s your credit tip for the day. Let’s get into first time home buying one, two, three. What does one, two, three mean? Does it mean it’s as easy as one, two, three? No, that’s why you need a fabulous team, a fantastic team, an experienced, savvy, great team of folks to help you. Not just 30 days, 60 days or 90 days before you buy. As I’ve told you guys before, I’m here in Southern California, but you’ve got to find them wherever you are in the country. Here are some tips to help you. What does one, two, three mean? Here’s what we’re going to do. I’m going to give you tips three years out from buying a house, two years out and one year out. Honestly, if you start thinking about it three years before you think you can buy a house that means you’re going to stop renting earlier. That’s going to save you tens of thousands of dollars three years out.
Three Years OutTip number one, you understand why you can’t buy a Tesla or a Bentley now. That’s something that you get, that’s something you understand because you’re familiar with the car buying process. It’s the first step in buying a home is realizing that you don’t know what you don’t know. You know exactly why that Tesla and that Bentley is not sitting in your driveway or your carport outside your apartment. What you need to know is you need to realize right away that you don’t understand this process and there’s nothing to be ashamed of about that. It’s not that you can’t do the math, it’s just that you don’t even have the equation, the textbook, the iPad or the Google Chrome thingamabobber. You may believe that you need a car and so you did the research and figure that out, perhaps you don’t believe that you need to buy a home. If that’s the case, then you go back to episode four and you can discover the why. That’s our Planning To Purchase podcast. Let’s go to number two. You’re three years out. The second thing you can do, believe that you’re three years out. You can do this. That’s where you go back and listen to number two. That’s our Rent Versus Buy podcast. That’s going to help you out. Take the mystery and the fear out of owning, but seriously, the fastest way to get you on the path is to believe that you are on the path. If you can pay average rent on your own for a two bedroom or a fancy one bedroom, then you can probably afford to buy a home as long as you get the down payment. That’s where we’re at right now. Number three, three years out, never too early to start working your credit. That’s episode three. We got a whole big old long episode. I’m going to keep coming back with more credit to us. It’s a race against the calendar. Seriously, you are busting a move against the clock with your credit. The longer time that you have thinking about it and taking care of it, the higher your point score is going to go. That’s the way credit works. What’s awesome is that you’re reading this and if you’re close, cool, we’re going to get you. You are going to go to two years in, one year next. This is a dream for you and you’re reading this as a goal for yourself, awesome. Do this, you do have an action step. Don’t tell me, “David, I don’t make enough money.” You can fix your credit. Trust me, when you’ve got that high credit score, you’re going to get a way better deal. It’s incredible because the credit scores’ going to change your interest rates and you’re going to save a beaucoup amount of money over time. Step number four, if you’re three years out, save your money. “Here he comes, he’s talking about adulting again. That old man, he told me I could buy a house. He got me all starry-eyed and dreamy, now he’s telling me to save money.” There’s a great book that I read. It was referred to me by a smart business coach. It’s called The Richest Man in Babylon. It’s like a parable or a fable. It’s about a guy who learns to live on 70% of what he can take in the day’s hunt. That’s it. He puts 10%, 10% and 10% away. The way we do it with our kids is 70% is spend, 10% is invest. That’s where we get a little bit more aggressive. 10% is save. That goes away under the mattress, then 10% is donate because I truly believe if you give, you’re going to get. It’s really simple. My kids hated it at first, they just learned to live with it. That’s the way you do it. Trust me, I sucked at this for a long time. Don’t do as I did. Do as I say because my dumb ass was broke for a long time. If you’ve got FOMO, you think you’re going to miss out all kinds of cool stuff, do when you get to do all that cool stuff years from now, when you have a ton of money in the bank and your friends are trying to figure out how to pay for their rent. I’m not asking you to take 30% of your money and put it away so you can’t touch it forever for 40 years. I’m asking you to take 30% of your money and put it away and live a little bit less so that you can buy sooner. Do not spend your monthly biggest bill, some of you that’s $2,000, $3,000 a month for the next one, two or three years. There’re lots of different ways you can figure out how to save money. There’re some cool apps out there. I haven’t found them yet, but if you had, tell me about it, says the old man. Number five, you’re one year out. Here’s the fifth and final thing that we’re going to give you. The final tip, plan. You’ve got to plan, call and talk to somebody. Find someone who’s going to give you the time and attention that you deserve, then start to calendar. Ask around, be humble, don’t worry if you don’t know about it. I didn’t know what a mortgage was until it’s embarrassing for me to even say. Don’t think that you can learn this all like you can research something online. You’re trying to buy a cell phone or a laptop or a video game, this is not. If you’re somebody out there who researches everything, kudos to you. You’re awesome. I was sitting with my videographer, he’s 24, and we’re having a conversation. I started telling a story. Everybody I brought up in the story, he Googled and then started taking pictures like pulling up Google images of them and then researching everything that I said. You little Millennials, you scare me. You guys are nuts. You look up everything. That’s cool. Realize that buying a home, it’s such a large process that you really need to talk to someone who’s been doing it for years. Unfortunately, there isn’t a lot of information out there. That’s what I’m here for. I’m going to try to keep giving you that information because there’s not a lot out. It’s time to start planning. The last piece of number one is before you go to open houses, before you start trying to go, actually save your money first. Before you go and talk to a lender, before you could talk to your mom, before you go talk to anybody, interview and find a good realtor who’s willing to work with you for the next 24, 36 months and get you set up to buy. That realtor is going to take care of you, save you so much money, hassle and headache. That’s episode six, Interviewing and Finding your Perfect Realtor. This one’s going to sound weird, but when you think you’re two years out, seriously, don’t keep your plan a secret. Tell your friends and family what you’ve been doing, you thinking about this and you’re on a serious 24-month plan. Tell them about what you’re doing because you don’t want to waste your rent anymore, you don’t want to waste your money, you’re serious about this. Tell them you have a firm grasp on the economic principles of ownership, equity, growth in both bull and bear markets versus the consistent, unwavering increase in the rental market. I’m telling you to take advantage of the outstanding tax benefits as well. Not to mention the fact that you see it as a strong investment for your portfolio in the future.
Two Years OutFine, don’t tell them all that stuff. Tell them you don’t want to rent and you’re trying to figure out how to save money. It’s incredible because it’s an asset that doesn’t depreciate as your car does. Although you’ve never slept in your car, you could sleep in this appreciating asset that you’re looking to purchase. That’s a home. Having a roof over your head, that’s the bare minimum of living your life. You pay for it. You never know. They might get excited about your plan. They might be really stoked for you. They could support you emotionally or even better, maybe not better, but in the scenario of trying to buy a home, it’s a little bit more helpful if they help you financially. You don’t know what their secret plans are. I’ve had folks that told their parents that they were getting ready to buy a house and the parents said, “I wish you’d told me earlier. We just sold a vacation home. We went and bought a boat and didn’t tell you about it. We were going to surprise you next month.” There is nothing sexier than saying, “Come on in. This is my house.” Owning is way more awesome than renting. Click To Tweet Seriously, talk to people early. You never know who might surprise you. This is the time to mention it. It could set a whole chain of events in motion. Please don’t forget your crazy aunts and uncles. Every older generation doesn’t understand the younger generation. The old folks from the ‘40s and ‘50s didn’t understand those hippies from the ‘60s and ‘70s. Moving on, the folks from the ‘60s and ‘70s didn’t understand all those crazy people in the ‘80s with your goofy neon clothes and your rolled up Don Johnson sleeves. Although that was awesome and I looked good in that jacket. My advice is to call them. Call them and tell them your plan and ask them for advice. Don’t call them and ask them for money. Ask them for advice. Don’t even have the intention of asking for money. You never know, they might just throw the option out there. Number two. When you’re two years out, assess and evaluate your budgeting. Take a look at what you did last year. Look at the month to month. If you started budgeting three years ago or three years before you’re ready to buy, then maybe look at, “How did I do last March? Can I do better this March?” Make it a competition for yourself. Try to be better. If you want to get out there, feel like you want to be a big baller and do all that cool stuff, awesome. If you’re doing all that just to attract someone from the opposite sex, the same sex, plants or whatever you’re into, then I’ve got news for you. There is nothing sexier than saying, “Come on in. This is my house.” Pretty exciting. Owning, it’s way more boss than renting. Number three. You might not expect to hear this from me. I say, when you think you’re two years out, before you sign that last lease, when you’re eighteen, twenty months out, I highly advise you go on a blowout vacation. Don’t put it on credit. Don’t go nuts, go out, treat yourself and buy a car because that becomes a big monthly payment. Do something big for yourself, two years before. If you’re a person who likes vacation, likes to travel you feel like the saving up for a home is going to suck and it’s going to suck the life out of you, treat yourself, but do it eighteen months before. Give yourself that little encouragement and say, “You’ve been doing great for a little while. Here’s a little encouragement, when you come home from it, now it’s time to buckle down.” Think of it as your bachelor or bachelorette party for your apartment. Number four. Surprisingly enough, number four and number five are the same, whether you’re three years out or two years out, save your money. If you have been saving, increase it by 3%, 5%, 10%. If you haven’t tried to actually budget, then go ahead and give it a try. Make this actual budgeting an important part of your life. Here’s what you keep telling yourself, budgeting is not a little sacrifice that you’re doing so that you can put that little chunk of money away every month. There are hundreds of ways that you can sacrifice every month. You can take a small portion of your income to build up your savings and your wealth. There are a hundred ways to prepare for your future, a hundred ways to save little bitty cash. You can open a savings account, you can buy stocks, you can put money in your IRA, you can double up on your 401(k) at work. You can eat out less. You can go shop at Walmart to save money. You can have a few less Starbucks, a few less desserts and a few less meals out. You can pre-party at home with cheap alcohol when you go out and instead of paying $12 for your cocktails. Cut your cable, you can keep your car for a few years longer. You can do all that stuff, but there’re little things that you can do and those little savings techniques, but it’s all there to remind you that you’re getting ready to cut out your biggest bill of every month. That’s your rent. $2,000, $2,500 a month, if you could put that away. You could cut out, shop at Walmart, pre-party at your house and save money on cocktails. That might save you $1,500 a month. What if $50 or $100, not $1,500? What if you could save $1,500, $2,000, $3,000 a month? That’s what paying a mortgage is. How about putting that money towards you instead of a landlord? I work in Southern California. If you’re out there in some of the bigger cities in San Francisco, if you’re in Chicago, New York, Miami, Dallas or Austin, it’s not cheap. If you’re thinking that your first purchase is going to be your home with 2.5 kids, 1.3 dogs and cats or whatever the average is, that’s not where you start. You need to work your way up by building that equity. Too many folks don’t have the information and so they end up renting for too long. Here we are, backing to save. Save your money and that’ll help you get out of that rent cycle and get into your stepping stone that will eventually get you to your dream house. Tip number five, if you’re 24 months out, plan. If you haven’t started or if you’re just starting at two years, then now’s the time to start your plan. If you started last year and you’ve got your realtor, now it’s time to get the rest of your team in place. You start talking to a lender, a credit pro if you need to, a CPA or an accountant. Does it sound scary? It’s not scary. Let the pros take care of all the work. Here’s something interesting. You’re 24 months out. This plan is different than the three-year plan. It’s time to calendar. I was thinking about this and I went, thirteen, fourteen years ago, my wife and I got married. She got this PDF huge calendar for our wedding two years before our wedding from TheKnot.com and that thing was her bible. She would come up to me eighteen months before the wedding and say, “We’ve got to call a photographer. We’ve got to call.” I was like, “Relax. We’ve got plenty of time.” “No, TheKnot.com says all the good ones go, especially if you’re getting married this time.” That calendar ended up being the best thing because when she would freak out, I would look at the calendar and say, “We’re fine. We’ve got 30 days.” When I would say, “What about this? What about that?” she would get stressed, “I can’t think about it.” I’d say, “Here it is, honey. We’ve got to start doing this right now.” That’s something I’m going to work on for you. I’m going to try to get a calendar together for you, but if you’re reading this and you’re 24 months out, start doing it. Fill in the blanks with everything that I’ve talked about. Most people, when they’re getting ready, they watch HGTV, they try to save their money and maybe try to take a stab at their debt. They might ask a friend or a family member, maybe even sometimes when you do that a few months before their lease is up. Kudos to you for getting there. Kudos to you if you’re thinking about doing this. If this is a longer-term dream for you, then now’s the time to start making that calendar because the sooner you can do it, the more money you’re going to save. The more information you have, the more informed and better buyer you're going to be. Click To Tweet One year out. I’m going to give you a few examples because this is going to be about five to ten more that we’re going to go in detail about everything, but let’s start with some of these things. The first and foremost, if you’re one year out from buying a house, the day or the week that you’re getting ready to sign that lease, the lease that you’ve decided is going to be your last lease. What I always say is that day that you signed your last lease should be the beginning of a detailed twelve-month plan, a detailed calendar. I will try to help you out and lay this out and give it to you guys in a PDF, but here are some of the things that you need to know.
One Year OutOn that day when you’re signing your last lease, “What are the exact terms of my lease? Can I vacate early? How much is that going to cost if I do that? Are there any extra fees in breaking the lease? How much notice do I need to give if we’re thinking about breaking the lease? Can the least be assumed by another tenant? If I find someone to take my place, can they finish the lease for me so that I don’t have any financial hits against me?” I’m going to tell you the rest of these in no particular order, after you save and after you plan, which is the steps in every one of these years. Here we are at step one, twelve months out. Here’s a bunch of stuff. First and foremost, David, the fun guy, is back. No vacations this year. Do not have any big expenditures. Don’t just think about your down payment as the chunk of change you need. We’ll get into that. Trust me, no big vacations. Staycations are fine. Save it for the barbecue and the patio set that you want to buy so you can have tons of chill nights in your own backyard. Think about that. When you have your house or if you’ve got your condo, you can be the place where you can invite people over and not have stress about it. That’s another thing. This is silly but give yourself some encouragement. Read up on hosting events, parties and read up on cool things to do, inviting people over to your house. Be the super entertainer rather than the club queen or the nightclub king. Use your new home that you’re going to be buying as the new personal hotspot for all your friends. You can be the coolest club in town. Can I sound any older when I say stuff like that? You can find some cool little Bluetooth speakers, get some sweet games, some fun, interesting lighting, party ideas. Start looking at stuff like that. It will give you the boost you need to keep things going. Here’s a great tip for you. Twelve months out, start driving the neighborhoods you’re thinking about. Drive them at day and drive them at night. Drive them on the weekends, drive them on your way to and from work. Start looking at them. Start looking at the cars in those neighborhoods. It’s very important because you need to know all that stuff as you get close. The more information you have, the better, more informed and better buyer that you’re going to be. Here’s a big one. Start messing around with them, become Google Maps pro. You’ve got to get serious about this. This is a giant money saver for you because time is money. If you’ve got to spend tons of time driving around trying to figure out the neighborhoods, you can virtually walk through any city that’s on Google Maps using the satellite and the Street View. Out here in Southern California, we sell homes near the area where I grew up in Long Beach. Long Beach is the LBC. That’s where Snoop Dogg came up. There are some sweet parts along Long Beach. They have the Long Beach Grand Prix there, right near the beach and the Queen Mary. That’s gorgeous. There are the areas where Snoop Dogg and some other folks grew up. You end up using Street View. If you find a cool house, go down the rest of the street. Take a look at that mini-mall. If there are too many bail bonds shops in a row, maybe that’s a little bit of a rougher part of town, but use that satellite image, you can find out everything. You’d be surprised, you can see what’s going on in your neighbor’s backyard. See if they’ve got a nice backyard or junkyard back there. Also, another great thing to start doing a year before, start using the police department crime stat websites. Around here in Southern California, they’ll have them in different colors. You look at a map and it’s like, “Here’s the red area, the green area, then the yellow or orange area,” if that’s important to you, something to do. There’s the Megan’s Law that’s where you can find sexual offenders and that website’s been up for a long time. You can check that out. While you’re driving around, you’ve got to go old school. It’s going to be tough to find it. We used to have these things called maps, they fold it out and if you could fold them back together, I think you’ve got a Ph.D. They’re insane. I have had clients that have had maps and then a box of colored pencils. When they drive around, they draw on the map, red, yellow or green. Not necessarily for the crime stats, but for the areas that they like. In your last twelve months, don’t be afraid. Don’t have any ego about it. Tell everybody if they’re going to bring you something for your birthday, bring cash in an envelope and you can draw a picture of a house on the card. Seriously, you don’t need to buy me dinner, you don’t need to buy me cocktails, you don’t need to get me something from Spencer’s gifts that is funny and a cute thing to put on my desk at the office. Ask your friends, your family and tell them this year for Christmas, you guys want donations. Do a Kickstarter. Do a Honeymoon Fund, but do it for your house instead. Just say, “For Christmas this year, donate to this Honeymoon Fund, but the honeymoon is the house honeymoon.” For yourself, go light on the personal holidays that year. Go light on the birthdays for the people that you love. Write them a song, write them a poem, do a contemporary interpretive lyrical dance for them. Getting down to some of the sacrifices. Get ready, learn to love that top ramen, the peanut butter and jelly and the mac and cheese. Ask for a raise at work. Why not? Go in, “I’m getting ready to buy a house. I’m feeling very responsible here at work, looking to take on some more opportunities. If there’s any overtime or extra shifts that I could do in the next few months, I would really love to do that. My base salary should be raised because I’m actually a responsible adult.” I don’t know, it might work. This is where you’ve got to also get really deep into prepping your numbers with your lender. Prep those numbers. Ask your realtor what you can afford, so you’ll avoid your sticker shock. Put it on your vision board. This is not going to be a last-minute decision. Track your goals. Use those apps, get cheap for the year. Tell your friends, “Sorry, love to go out with you, but not tonight.” You’d be surprised how many of them come over. Do some positive things for yourself during that year. Take some yoga, sit on the beach, the lake, the pool and envision not paying your landlord ever again. If credit is an issue for you, now’s the time to actually pay a credit specialist. You can get free advice and work the tips for a couple of years. Six months is the minimum. I’d say at twelve months ahead, you can pay someone, usually a few hundred dollars. At most, it’s usually maybe around $1,000, but that might put you up a hundred points, which can save you tens of thousands of dollars in the life of your loan. Remember, if it’s more than just you, start talking about what you guys think, don’t try to read each other’s minds. Start talking about the haves, the must-haves and the like to haves, the “it’d be cool to have in the house.” Don’t forget to talk about the neighborhood. That’s super important. As we get close in the last three, four, five months, there’s about a billion we’ve got to do. Thank you so much, guys. If you’re three years out, go ahead and read this stuff about interviewing the realtor because by the time you get there, it’s going to be locked in your brain. We’re on Facebook at How to Buy a Home. That’s a private group. We’ve got all kinds of cool stuff for you. I’m on Facebook, David Sidoni and Associates Real Estate, on Instagram at @DavidSidoni. We’ve got some exciting stuff happening on Instagram. As a matter of fact, we’ve been talking to some people out there. It’s been fun. If you’re looking for more information, DavidSidoni.com. We are up and running. I’ve got all the podcast information, listen to past episodes. If you’re more of a reader or you have a friend that’s more of a reader, send them to DavidSidoni.com. There’re videos there, there’re blogs and all the written word of all the podcasts’ information. We’ve got folks all over the country that have read to the podcast, called me or messaged me and they’re on the road to home ownership. We’ve got a boss in Atlanta, a boss is the boss. He’s in the ATL. We got him hooked up with a realtor and he’s on a twelve-month plan. Philip and Laura are in Brooklyn. They’re ready to start thinking about buying. We got them in touch with a great realtor as well. Ryan in DC, the same thing. He’s my friend’s little brother and he should have bought a long time ago. We’ve got Stacy and Rowe. Stacy and Rowe are in Hawaii. I got Harrison here in LA who called me. We’re going to help him out. I already got a first-time home buyer in escrow. She listened to the podcast and I got the call from the realtor. She’s in Denver, in escrow. Jacqueline, congratulations to you. Let that be an encouragement for the rest of you. If you’re looking to buy a home, get educated, then remember, you can do this. Have a wonderful day.
- Planning To Purchase – Previous episode
- Rent Versus Buy – Previous episode
- Episode three – Previous episode
- The Richest Man in Babylon
- Interviewing and Finding your Perfect Realtor – Previous episode
- Megan’s Law
- Honeymoon Fund
- How to Buy a Home – Private Facebook group
- David Sidoni and Associates Real Estate on Facebook
- @DavidSidoni – David’s Instagram Account