From CNBC.com: Self-made millionaire and “Shark Tank” star Barbara Corcoran wants young people to buy homes. “The faster you buy your first home, in my opinion, the better,” she tells CNBC Make It. “You’ve got to get in the game.” Other experts agree, including self-made millionaire David Bach, who says that not prioritizing homeownership is the single biggest money mistake millennials are making.
Choose A Home You Can Afford
Buying a home may be the biggest purchase you ever make, and you want to be sure the one you choose is one you can afford. Corcoran, who made her fortune in real estate, offers a simple formula to help you figure out just how much you should spend on your first home: “Multiply your salary times four and that’s generally what you can qualify for.” This formula assumes you’re making a 20 percent down payment, she adds.
Based on Corcoran’s equation, here’s roughly how much home you can afford if your salary is:
$30,000 a year: $120,000
$40,000 a year: $160,000
$50,000 a year: $200,000
$60,000 a year: $240,000
$70,000 a year: $280,000
$80,000 a year: $320,000
$90,000 a year: $360,000
$100,000 a year: $400,000
While, ideally, you’ll be able to make a 20 percent down payment, “if you haven’t been able to muster 20 percent together, you shouldn’t lose heart,” Corcoran tells Make It. Some experts, like Bach, say a down payment of at least 10 percent is OK, though more is always better.
Look into Loan Programs to Help with Financing a Home
You can also look into Federal Housing Administration (FHA) loans, she says, which only require you to put down 3.5 percent. They do require mortgage insurance, though, she notes: “The problem with the FHA loan is your closing costs are going to be slightly higher: You generally have 3.5 percent in closing costs … but with a FHA loan, you’re going to be forced to buy additional insurance, which can amount to as much as 2 percent.”
Another simple rule of thumb to follow, says Corcoran, is to aim to spend about 30 percent of your take home pay on housing costs. Keep in mind that this 30 percent encompasses more than just the sticker price of the home: It should include all homeownership costs, likes mortgage interest, taxes, insurance, maintenance and any renovations you might want to make.
“Every single person who is living in a multimillion-dollar home started with something smaller that they didn’t find acceptable. Lower your standards. Get something small so you have a chit in the game, and you can trade up the studio to a one-bedroom, two-bedroom, four-bedroom house.”
Choose a New Home in Brookline NH
Beote Construction, a NH based general contractor is currently constructing new single-family homes in Brookline, New Hampshire. Clover Hill is a new community on Sawtelle Road. These quality homes, on large lots, will feature large kitchens with sold surface counter tops, stainless steel appliances, family rooms, 3-4 bedrooms, garages and options for bonus rooms. Prices range from $350,000 and up. Brookline NH is just minutes to Hollis and Nashua. Contact president, Conor Beote for more information.