So you’re thinking about buying something that costs way more money than you think you’ll ever see in one place at one time. On top of that, you plan on borrowing the money and paying for it for the next 30 years! Scary, right?

It doesn’t have to be!

Get some help. Do some homework. Buying a house, done right, will turn out to be one of the smartest decisions you ever make.

Let’s look at the first issue; cost.

Yes, a house can represent a significant amount of cash, especially to someone young who has yet to reach their full income potential. The reality is that you don’t have to pay that all at once. In the vast majority of first time home purchases, you never end up paying all that money for your first house.

You put as much money down as is comfortable and required by your lender, mortgage the rest, and pay monthly (just like rent.) Except, mortgage payments (minus interest) apply directly to the equity in your home. The magic word here is equity.

Equity = (how much your house is worth) – (how much you owe on it)

Think about that. Instead of paying rent to a landlord so that you can live in an apartment, you pay a mortgage that increases the equity you have in your home. (aka, you KEEP some of that money.) It works just like a savings account. You build up this equity in your home that you can either borrow against or apply to the purchase of your next home.

Not to mention, the home will appreciate in value (about 3-5% average but possibly much more) over time, which will only add to the equity you have in your home.

Get it? You buy a house now, pay on it over the next 5 years, then use the equity you’ve built in it to purchase a bigger, nicer, prettier house in a better neighborhood and repeat the process. Play it right and you end up with your dream house on a lake 20 years down the road.

One last thing, I can’t forget to mention the first time home buyer tax credit. Get a contract on your house by April 30th and close by June 30th and you get a free $8000 check from the government. Put that money back into your house and that’s another $8000 of instant equity!

We’ve touched on that second issue, but let’s revisit the concern over a 30-year mortgage payment.

You’re committing to this monthly payment for the next 30 years. That can be a little daunting, but let’s think about it.You buy your first house. Are you really planning on staying there for the next 30 years? Maybe, but no one really does.

5 years later (on average), it’s time to move on to the next best thing. You sell the house and pay off the old mortgage. Thus, removing that 30-year elephant you had on your back.

Sure, you’ll probably have to finance the next home purchase, but at this point you’ll have more money to put down and, hopefully, a much higher income than you did when you were in your early twenties. Maybe this time you can afford a 15-year home loan.

Maybe you still have to go with 30. Here’s a little trick:

Make one extra payment each year towards the principle of your home loan and you can reduce the term of your loan by 7+ years.

No. That’s not a magic trick. It’s real. It has to do with the way interest capitalizes on your loan. Make extra payments and you’ll find yourself in a beautiful place.

All that said, first time home buyer, your logical brain should be resting easily. However, your emotional brain, the one that rules the world, probably isn’t convinced.

Call or email me and we’ll talk about what your best options are and how you can set yourself up for a bright financial future.

No, I won’t try to sell you anything.

Good luck! I’m only a phone call away if you need some help. I love helping people get on the right track.

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