Home buying is different for us than it was for our parents, and life for us is not how it was for our parents, either. For them, the American dream was having a big house with a white-picket fence and 2 kids playing in the front yard. For them, saving up huge sums of money for a down payment on home they would spend the rest of their lives in was the norm.
It’s not like that for us. Our career paths are different. Our finances are different, and our American dream is different. Gone are the days of 40-year careers with the same company and growing old in the first and only house you’ll ever buy.
We have a desire to be flexible, poised to follow opportunity and to minimize our impact on the Earth. We are not traditional home-buyers. We are redesigning the landscape of what homeownership looks like to fit our generation.
Our generation is accruing larger amounts of debt earlier than our parents ever did. Mostly we have the increased cost of living and higher education to thank for that. When you are already $100K in debt by your early 20s, saving money for a down payment on a home seems impossible. The good news for us is that large down payments and perfect credit scores are no longer a requirement.
Low to No Down Payment Options
Financial intuitions are starting to adjust to our needs and have begun to offer very low- to zero- down payment loan options. The USDA offers a $0 down payment loan program. If you are willing to pay for PMI, private mortgage insurance, you can purchase a home with only 3.5% down through an FHA loan.
Regardless of the loan type you get, always ask the sellers to help cover the closing costs as part of the sales agreement. This is less money out of your pocket. An FHA loan also allows sellers to cover up to 6% of the buyers’ closing costs, and the USDA does not set a limit at all.
Freedom from Banks
If banks are not an option for you because of poor or non-existent credit, look for someone willing to do owner financing or a rent-to-own deal. With seller financing, you make payments to the seller like you would the bank, but you don’t have to jump through all the credit check hoops. With rent-to-own, some of your monthly payment goes toward the future purchase of the home. This allows you to invest in the home while you save for a down payment or repair your credit rating.
Now that you know it is possible to finance a home with little money down or poor credit, you need to decide what kind of home you want to buy. To be flexible, poised to follow opportunity and minimize your impact on the Earth, you have to think outside the traditional-home box. Stick-built houses are more permanent and more expensive than you necessarily need.
Tiny houses, mobile homes and house boats are cost effective and unique dwellings that allow you to take home with you wherever you go. Erase the thought of a trailer park from your mind. Think instead of a modern minimalistic lifestyle that grants you financial and physical freedom.
Tiny and Mobile
Tiny houses offer big benefits at a small cost. The cost of a tiny house can be as little as $20,000 for a new construction. There is a movement of people who currently own large homes with large mortgages that are downsizing to tiny homes to gain financial freedom. Tiny homes can be permanent or mobile, and they are designed to be highly efficient.
If reducing environmental impact is a concern for you, tiny homes can be designed to be completely off-grid with solar power, composting toilets and rain collection systems. Imagine no water bill, no electric bill and a minuscule mortgage. Makes downsizing appealing, doesn’t it?
Another way to go small is to go with a travel trailer. Before you turn your nose up, though, take a look at how chic this lifestyle can be. The benefits of living in a travel trailer are similar to a tiny house, but this home is even more mobile. If you have a career that requires you to travel, you will never have to be far from home because home can go with you.
There’s an old saying that says “If you’re lucky enough to live by the water, then you are lucky enough.” There is something about a body of water that is good for the human spirit, and people have forever flocked to the banks and shores to claim their stead. This high demand can cause real estate prices to skyrocket — but that’s only if you live on the land.
Living on a boat is not for everyone, but for those who can make the adjustment, it offers a unique lifestyle and cost savings similar to mobile or tiny homes. You won’t have to pay land taxes or electric bills, and you can live off-grid. There will be some logistical issues to work through, such as where you will dock your home, but it is almost guaranteed to be cheaper than renting an apartment.
Make It a Modular
If mobile doesn’t mollify you, and the idea of tiny terrifies you, prefabricated homes are your next most cost-effective option. Often called prefab or modular homes, the cost of building these homes is kept low because they are built in a factory. Things like weather delays and sub-contractors, which drive construction costs up, don’t come into play.
Once delivered to the construction site, there is virtually no difference between a prefab home and a stick-built construction. They don’t depreciate in value like mobile homes do — think trailer park — and they can be any size and configuration that you would have in a regular house. You’re basically getting a traditional home at a much better price.
If your heart longs for a stick-built home, though, there are ways to purchase those for less as well.
If you’re willing to take a gamble on the chance to save big, auctions are a great way to purchase a home for less. Houses end up on the auction block because the previous owner was unable to pay the mortgage or the taxes. The price of auction houses are often set for the amount still owed to the bank, not necessarily what the house is worth. That is where the risk comes in. Buying a house with cash at an auction doesn’t afford you the opportunity for the home inspections and appraisals that traditional home buying does. You may be getting a gem or a dud, and you probably won’t know until after you’ve bought it.
If you’re ready to grab your slice of the American dream and become a homeowner, do it your own way. There’s no need to get bogged down in the way things were. Do things how they work for you, and live the life of comfort and freedom you want to live.