3 Tips for the First Time Home Buyer
San Diego is known as one of the most beautiful places to live in the United States; scratch that, the entire world! So with that level of desirability comes a demand for housing. For many living in San Diego, rent increases and affordable housing may seem harder and harder to come by.
Being a first-time homebuyer in San Diego can feel like a financially daunting task. Questions like, “How can can I afford a home in San Diego?” and “Why should I try to buy a home in this sellers market?” can arise when considering to buy a home here.
I have put together three tips and tricks that I have personally utilized for many of my first time home buying clients in San Diego. These tried and true tips will help you weigh your current financial situation, leverage tools and resources that you may have never even known were available to you. Here are my three tips:
1) You can use your 401K as a down payment on your first home
Many do not know this, but you can use up to half of your 401k as a down payment on purchasing a home. This is just one of a few uses of your 401k that you have access to penalty free, before retirement. Think of it this way: You are taking a loan out on yourself and will make small installments overtime to pay yourself back. This is best used for a small down payment and and allows you to use your money to diversify for portfolio.
2) Renting is Not a Cheaper Alternative to Buying
Many tend to think that renting will be a cheaper, more sustainable way to afford housing in San Diego. This is not always the case. Buying use a home loan or your 401k, you are able to match rent and mortgage prices
Especially in San Diego, rent can be high in certain locations, when you look to buy it’s good to take in some factors that come into place.
How long you’ll live in the home
The longer you live in the home, it’s considered better due to the spread of costs
The cost of housing in your area
People think that renting is better due to expensive house prices, but if rent is high in your area, it might just be better to buy
The opportunity cost of your taxes and insurance
What kind of long-term return could you get if you invested this money instead, into the stock market, CD, or even a “high-interest” savings account?
The opportunity cost of your down payment
Similarly, how much of a return could you get if you invested in that lump sum instead?
3) The Local Market Doesn't Just Favor Home Sellers
Rates haven't been this low in awhile, which is great! Lenders are offering low, first-time home buyer credits and home buying assistance programs. This is big for home buyers as it gives them the opportunity to look into these credits/programs and see what works best for them! Makes home prices almost the same as renting, so it’s more convenient to buy a home!