Your 2020 Game Plan
As you could probably guess, a majority portion of my business is first-time, millennial home buyers. Most people go with what they’re comfortable with when it comes to something big like buying or selling a home, and while I think that I’m proficient enough at what I do to work with anyone at any stage in life, that’s just the way the cookie crumbles. A lot of people have many preconceived notions when it comes to buying a home- I need to have 20% to put down, I can’t get a mortgage due to student loan or credit card debt, I don’t want the responsibility of a mortgage payment. And then there are the unknowns that many people don’t think of or do the research on- what is the area that I want to buy in have to offer in the next five years, closing costs on top of your down payment, what are the different loan program options? We’re getting to the time of year that, if you’re preparing to buy or sell a home in 2020, we need to meet and go over the game plan of what that looks like. To prepare for that, I wanted to jot down some commonalities that I go over with a lot of people when meeting with them that can help you build the framework of your plan. Let’s get the ball rolling.
First off, and the most important part of starting the home buying process is figuring out your budget. A HUGE misconception that I deal with folks on is that they think too heavily on the price tag and don’t figure out what they can afford on a monthly basis. Yes, that matters when it comes to what you can afford down-payment wise, but there are enough loan programs out there that can help you with the down-payment side of things that it’s not as pertinent. And it doesn’t matter if you have $50,000 for a down-payment and think you can buy a $300,000 house if you make $30,000 a year. The math has to work out. So that’s why you need to figure out your monthly budget first. If you can afford $1,500 on a mortgage, you don’t need to unnecessarily limit yourself to a $200,000 house that the mortgage is going to cost you $1,100 for but it doesn’t come anywhere close to meeting your needs or wants. That $400 in monthly budget room that you have been paying for the last two years in rent could be an extra tens of thousands of dollars in purchasing power that can get you that extra bedroom or bathroom that you know you want.
The second thing, and the one that’s a lot more front of mind for most people, is debt management. If you have a problem with being late on payments for things that would show up on your credit card, you need to do everything you can to set reminders, make auto-payments, etc to make sure that doesn’t happen again. Any time that there is a 30, 60 or 90 day late payment made on your cards or loans, it is a major hit on your credit score and credit report overall. Not only will that put you in a higher rate bracket for your mortgage, it could end up being the reason for an underwriter to deny approval of your loan if you have too many late payments. You’re going to have to make that payment eventually (and if you’re paying late it’s just a higher payment, anyway). Do not let your excuse be something as simple as, “I forgot”. It is not worth screwing yourself over on late fees and the repercussions on what it could mean for financing down the road.
The idea of having a mortgage payment can seem pretty daunting. To me, it always felt very permanent. I’ve always been pretty conservative when it comes to spending money, so thinking of something that is going to be a responsibility to pay every month for the next 360 months was always a weird pill to think about swallowing. However, you’re going to make that rent payment of $1565 for your 800 square foot two bedroom apartment to live ten minutes from downtown. And that rent payment will probably go up to $1665 next year, and another $50 the year after that. Nashville is only going to get more expensive to rent in for the next decade. And for what? You’re not building any wealth by renting. You’re not building a positive credit profile. You’re basically opening your 3rd story window on the first of every month and throwing out Benjamins to be carried away in the wind. It’s a rude truth, but it is a truth all the same. The middle Tennessee real estate market is printing money right now. You’re doing your financial portfolio a disservice if you’re not at least preparing yourself to buy. As I said, you’re going to make that rent payment every month. Why not roll that same amount that you’re currently paying in to a mortgage payment and let that monthly housing payment work for you?
If you’re think of selling your home next year, here are a few things for you to think about. 1. Do the upgrades that I think my home needs make a difference in the sales price that I could list my house at? Too many people want to do major upgrades that don’t have a material change on what the home could sell for. For example, backsplashes, new paint, staining a deck, they don’t really offer much for an increased sales price. Another one that most people think would improve the value of their home, an upgraded HVAC. When an appraiser comes to your home, they aren’t going to put much weight in to how new or old the HVAC system is. The inspector will, but that isn’t going to affect your appraisal much. 2. What do I need to do to be able to increase said sales price? The money that you’re considering for upgrading some tile work or painting a room could be rolled into upgrading your kitchen appliances, something that has a material effect. I said earlier that it doesn’t make a ton of financial sense to upgrade your HVAC system, but you could pay $150 to get it serviced. That will help it show up as less of an issue on the buyer’s inspection, preventing you from being potentially asked to get it serviced anyways or something even more extensive if there are issues. Both of these questions are imperative to being answered if you want to get your home sold quickly and getting the highest price for your home. Don’t do a ton of expensive housework before listing that isn’t going to materially increase the price that your home eventually sells for.
I said earlier that if you’re planning on buying or selling in the next year, you need to start planning that out in the fourth quarter. It’s a BIG step. Too many people want to begin the process a couple of weeks before their lease is up. Or figure out they want to sell come December, potentially costing them thousands of dollars. Even if you have an agent that you have used in the past, or have had recommended to you by a friend, I’m willing to sit down and help you map out the next steps. The real estate market is all about getting any edge that you can. I equate most things in life to sports because wayyy too much of my every day is consumed by it (sorry, wife) and I think the current housing market is a good example. Take the Summer Olympics for an example. Simone Biles has the chance to be the greatest Olympian to ever live. No one has ever dominated the yearly World Championship events like she does, and she’s a beast during the games. However, say she accumulates all the golds that she did back in 2016 (buys her first home), goes home, and then doesn’t get on the beam for a couple years, or avoids training. Based on her track record, you know she is going to compete come 2020; but if she’s not ready when the time comes she has no chance of getting the most out of what her body is capable of(selling without being prepared for what the market is saying). The competition is going to be much harder next year because everyone has been preparing to beat her specifically. However, if she would have had the right coach and trainers (having me as an agent), she would have known what her competition was bringing to the table and knew that she would have to be on her game to get the most out of it. Who would want to be a no-show like Ryan Lochte when you could be like Phelps, or Biles, or Ledecky? Prepare yourself now, reap the rewards later. The real estate game is not hard to play.