How in the h**l of it can first-time-buyers afford a house today?

Question

say you're living at home with your parents and want to move out.

Or you're getting married and want to buy a house.

If you haven't got one to sell, how do you do it?

People usually earn 20-30k a year, yes?

Decent, not terraced houses cost on average 200k.

How do you do it?

And will house prices go down?

Answer 1

I'm single, 26 and earn £14K-15K a year and I managed to get a property  last year.  A mid terrace house, it's a lot smaller than the other houses in the street cause mine and next door was split into two, but I don't care as I liked it and it was my only chance getting on the property ladder.  I could have gone for a higher priced house BUT I was thinking ahead as the less I borrow the less my monthly payments are.

I did it by saving and not going for so called "decent luxury" houses".

Answer 2

my heart goes out to young people , not only that how do you furnish it .

Answer 3

You work hard and save up a down payment.

You make a strict budget - how much do you HAVE to spend to stay alive?

Two peolpe making $10 per hour earn almost 42K - add second jobs and bump that up.

You buy a cheap little house in a not-so-perfect neighborhood that you can afford.

You and the wife work hard and live without luxuries for years and save money.

You slowly BUILD the American Dream, you don't buy it on credit and by watching Lifestyles of the Rich and Famous.

Answer 4

Having 9 daughters, this is a question I've pondered much.

So here's what I've told them (besides the obvious; save, save, save and stay out of debt).

1. Don't be in a hurry. Most of us didn't buy our first home at age 21. You shouldn't expect to do so either. Our first home wasn't nearly so nice as the one we're living in now, either. I can see from your question that this is an issue for you. You're talking about buying a home as soon as you move out from your parents? Get real.

2. Consider a fixer-upper. You're young. You're strong. You'd be surprised what you can do.

3. Look for properties where the owner is willing to carry the note. You don't have to qualify, closing costs are a lot less, and down payments and interest rates are negotiable. Why would a seller do this? If a seller is living in the home they're selling they probably won't have to pay capital gains tax on their profit. If it's a rental, however, they will and the tax bite can be huge if they get all the money in one year. The solution? Carry the note so you spread out the income over many years. Here's the beauty of this. Rentals are often fixer-uppers so you see where I'm headed? A fixer-upper rental where the owner's willing to carry the contract... Where do you find properties where the owner's willing to do this? They list them with realtors just like everyone else.

4. Consider For Sale by Owners: People who sell it themselves do so because they don't want to pay that big fat commission to a realtor. The problem is buyers aren't as comfortable with for sale by owners so they typically get less for their house. It's ironic. In order to save a $15,000 commission they end up getting $20,000 less for their house so it really ends up costing them more. Even though buyers are nervous about for sale by owners, they shouldn't be. All you have to do is get a blank contract from a stationary store or realtor, make your offer with it, and take the signed contract to a title company (or escrow company as they're called in some states). Honestly, that's all you have to do; the title company does all the work. OK, so you have to go to a mortgage company if the seller's not carrying the not but you get the idea. The title company does all the work that everyone's so scared about, you know, what if I get ripped off, etc.

5. Look for some low or zero down payment options. These aren't scams. Federal VA loans are zero down and FHA has some extremely low down payment loans. Some lenders will offer zero down loans to help avoid another of their properties going into foreclosure.

6. Finally, scale down your expectations. Getting a start is the hard part. Once you've got a home moving up is easy. So maybe the home's small and not perfect. Go back and look at item # 2.

Answer 5

home prices are declining right now

the way you become a first time home buyer is through self-discipline and self-restraint. . .same as it's always been

SAVING a good portion of every paycheck towards that downpayment--much easier for those living at home

NOT spending your entire earnings, not blowing your money on new cars and toys and clothing and entertainment

AVOIDING running up big credit card balances

BUILDING savings and credit rating

Nowadays, it frequently requires two incomes to buy a home, to have qualifying income, or you need to save and save, and perhaps get a part-time job and save all of it

FYI to 9 Daughters:  Right on with most of your advice, BUT 0% down loans are a BAD idea, and aren't available currently.  They buyer has NO equity and won't for a very long time unless they make extra principal payments, which is an excellent idea in first 10 years of a mortgage, and which can cut tens of thosands of dollars and years off your mortgage.

Answer 6

I was just as hard to buy my first house. I just worked 7 days a week and saved every penny for a decent deposit and I was on a lot less than £20K.

Answer 7

House prices will continue to go down, and they need to. You wouldn't think so, however, to listen to all the clarion calls for lower interest rates from all the vested interests. The elephant in the room that they are willfully ignoring is this, house prices are far too high.

Just to give a measure to this. At the end of the last insane housing bubble, (late 1990's) the average house price was about 3.2 x average salary. That had dropped to just over two by about 1992. Now, in 2008, despite relatively small drops in value over the last few months, (10% roughly) they are still five times average wages. That gives you some idea of how grossly over valued they still are. It would take another 40% reduction at least to return to values that appertained in the early nineties, relative to average wages.

Answer 8

Go to Manchester, it`s the only semi-decent place in the UK.

Answer 9

That's been the same problem for decades. Only difference now is that a lot of would-be homebuyers don't understand credit any more.

Let's step back into the time machine and go back, oh, let's say 23 years. At that time I was in the same position. I earned probably $25,000. Houses cost about $210,000 where I lived. (Falls Church, Virginia). I had decent credit and some savings. Interest rates were around 7%.

I found a house I could afford on my income. I got the sellers to pay 3% of the closing costs. I borrowed some money from my real estate agent--her commission, secured by a second trust in the property. My mom co-signed. I rented out the downstairs to a tenant for $500 a month. The loan was an adjustable rate, so that saved me a bit on the first year's mortgage. My total out-of-pocket cost was under $7,000.

Three years later, I'd paid off the second.

Twenty-three years later I still own the house. It's been a rental for a number of years. It's got a nice positive cash flow, and the value of the house, even with the recent real estate downturn, has tripled. I still have the original mortgage--still an ARM, now at 5.375%.

You can do exactly the same thing today. Exactly. There are FHA loans out there requiring just 3% down. You can find Realtors willing to lend you their commission secured by a second trust. You can rent out a room. You can get the seller to pay most of the closing costs. You probably can find someone to co-sign the loan.

And there are so many more options available to you now. You can lease-option a property. (Or, similarly, a contract for deed. Or lease-purchase.) You can find a fixer-upper and get a 203k loan that will let you buy the property and fix it up, all based on the fixed-up value of the property. You can do an equity-share arrangement. (Equity shares were around 25 years ago; they're still a great idea.)

Buy a couple of books on some of these techniques. Then look for a good Realtor--one who's been around for a while and understands creative real estate. It's really not difficult.

Hope that helps.

Answer 10

I wouldn't bother.

The property ladder is not something that is worth being on to tell you the truth.

We are in the process of selling up and going back to renting.  The worry of interest rates, rising mortgage costs and negative equity is really not worth the aggro.

Answer 11

house prices are going down all the time, it`s the best time for first time buyers to buy there home now, the market will pick up again so the house will be worth a lot more

Answer 12

The problem with how you are looking at this is the income.

Most adults make closer to 50-100k a year. Even fresh out of college you can expect 50-60k.

If people are not willing to work hard enough to afford a house that is there choice, you can't expect them to buy something they have no desire to earn.

Answer 13

we'r all doomed!!

Answer 14

move to cheaper area here terraces cost 125K in brighton they are 400k

prices will go down so long as buyers are boycotting the market.

if you want to buy one you SAVE and start with a flat like we used to do in the 1970.  

Many first timers are being greedy wanting eh marriage the new cars (2) and a 3 bed semi as a starter home!

make sure your expectations are realistic when astarting out and you'll find thousands of properties for you.

Answer 15

Im with you. I am single. I am sick of renting a small place for $1000 a month. Id love to get a home instead of throwing my money away toward renting. However, I live in Milford, CT right now. I dont have a lot for a down payment but I can get a $200k loan. There are two problems with that for me. There are very few 200k homes in my area that seem worth the price. If I chose to go to a cheaper area that homes are still over priced, in not so safe areas, and the property taxes are incredibly high. The worst part my estimated payments including taxes/insurance would be over $1600 a month. That is half a months pay for me.

I seriously do not know how people do it. Especially in my area where most decent homes are close to 300k or a lot more.  

Answer 16

I'm 21, single and earn £17k a year. I'm doomed!