Purchasing a home can be scary and stressful.
This is especially true for first time homebuyers. There is a lot to consider such as where you want your home to be, what you want your home to look like, and cost. Cost is probably the biggest thing to consider. You should think about what you can genuinely afford early on. Therefore, it is important to make sure you are aware of programs like the FHA loan which can help in the process of purchasing a home.
What is an FHA loan?
Bankrate.com describes it as “a government-backed mortgage insured by the Federal Housing Administration.” These loans do not require high credit scores or downpayments which is a plus. This is something to be mindful of when looking at these loans. As stated by bankrate.com, FHA loan borrowers have to pay for FHA mortgage insurance. Therefore, borrowers are expected to pay for two insurance premiums.
Owning a home can be possible for everyone.
According to bankrate.com, “FHA mortgage insurance premiums will be canceled after 11 years for most borrowers if they financed 90 percent or less of the property’s value.” This means for those who put 10% down and keep up with their payments each month the premium can be canceled following 11 years. With these loans a lower credit score is allowed (500 versus 620 for a standard loan), and a lower down payment can be asked for. Therefore, an FHA loan will allow you to start the process of owning a home and stop renting quicker.
Purchasing a home is a great way to start building generational wealth.
Owning something like a home allows you to have equity. This can be passed down from one generation to the next (personalcapital.com). However, there may be questions about why this is important or why one should care. Well, there are a few reasons. Anne-Lyse Wealth discusses how “Generational wealth is important because you have more freedom to think and live the life you want” (personalcapital.com). Therefore, having wealth built up will allow for more possibilities to open up for yourself and future generations to come. This is not the only way to create generational wealth. Here are some more options to consider from Crystal McCullough as listed on forbes.com:
Being educated on finances
“Financial education and sharing these tips will begin to create the foundation for lasting wealth.”
“The good thing about investment options is the low barrier of entry to many of them and the availability of information out there to inform your decision.” (Check out Revived Prosperity’s blog on investing here!)
Starting a business and saving money
“Through saving, you will have freedom to take more risks and even make investments that could pay off down the line. It is well known that wealth can be generated through business ownership.”
“Life insurance is an imperative tool to pass down wealth.”
Consider your MAO (Maximum Allowable Offer)
It is important to be mindful of the most you are willing to spend. Do not be scared to walk away if the deal is not working for you. David Shands and Terrica Lynn Smith discuss this in “
Consider the mindset that “every house is a business”
When looking at purchasing real estate, a way to build generational wealth is owning a rental property. Many people may initially think about purchasing a fixer upper property as they are typically cheaper starting out. However, consider purchasing a turnkey property instead.
In the Millionaire Mindsets podcast episode “The 9-to-5 Millionaire” it is discussed how turnkey properties are a good investment. Xavier Miller and Mit Smith describe turnkey properties as ready to move in real estate, or there may already be tenants living there. With a fixer upper, you will have to spend a lot of money into building up the property. Therefore, it will take much longer to make money back on this investment. With a turnkey property it could take much less time to get your money back and start earning a passive income. If you want to learn more about passive incomes check out our blog on them here!
Listen to the rest of Miller and Smith’s podcast here to gain more insight on getting started with real estate
There are a lot of great options to consider when looking into building generational wealth and home owning. Though these are big decisions to make with a lot of factors to consider, it is important to start thinking about and getting a head start on them.