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I don’t know if you knew this, but it takes $4,000,000,000,000 to buy a cheap, dilapidated home in Phoenix.
Do you have that in your bank account right now? I mean, everyone else does, why not you?
Seriously though, it does take some money to buy a home. (Key word here: “Buy”)
Here are three things you need to get your butt in gear:
What is cash? Well, it grows on trees, of course! But only in my fairytale books which I sold at a garage sale 20 years ago. (Sorry.) If you have a cash-money-honey tree then nobody cares who you are, what you look like, who or what you accidentally hit with your car on your way to the grocery store, they will just give you Taj Mahal and name Mars after you… TODAY.
In Anytown, USA, Earth though, most folks love that FHA loan, yo. It’s got a nice 3.5% down payment so you can’t really mess it up (unless you stop paying it). Closing costs are something else you need to pay for, which are your lender fees, title fees, and title insurance. It’s almost like a costly breakup or divorce – except it’s helping your future investment, not hindering it.
Altogether, this adds up to about 7% of the home purchase price. Seven percent of $200,000 is $14,000, which I guess is still the same amount as putting your kid through one semester of college. But there are some options to help you with this expense. Down Payment Assistance is available and closing costs can be rolled into your loan! Neat-o! Save up anywhere from $1,000 to $5,000 in your bank account – just to be safe.
Preferably, you need a perfect credit score of 1,000 points to even have a chance at owning a home. However, having a minimum credit score of 620 is also cool and workable. Any less than 620, and it is super hard to qualify to buy a home. A 640 credit score by itself will qualify your for Down Payment Assistance programs. Get that credit score up to 620 or 640 if you can. You can contact Credit Counseling, or work with your bank or credit union on ways to help increase your credit score. A higher credit score means you’re paying less interest, which is usually equal to 50 lattes a month.
For those of you allergic to math (like a good fraction of my friends), here’s a break down of some median home prices and what you would need to earn yearly and hourly to afford them.
Right now, the median home price (the middle price point between the highest and lowest home prices) in Phoenix is $225,000. If you want to buy a home considering that particular median price, your mortgage payment would be:
$1365.00 per month
So, your yearly income would need to be:
$52,300 per year
And your hourly wage would need to be:
$25.14 per hour
If you want to live in Gilbert with a median home price of $281,000:
$1,666 mortgage payment per month
$60,000 income per year
$28.80 per hour in wages
If you want to live in booming Avondale with a median home price of $196,250:
$1,211 mortgage payment per month
$47,500 income per year
$22.82 per hour in wages
It’s actually fun and cool to research this stuff to find a city that fits your income and future goals.
If this is all really scary and paralyzing to you, but you still want to buy a home, well, yeah, you should just wait until your death bed to decide. Don’t ever buy a home.
However, here are some more numbers for thought to create some action within you:
2016’s median home price: $210,000
2017’s median home price: $225,000
Every year, the prices of homes are going up because Phoenix keeps growing and growing like that beanstalk from Jack and the Beanstalk. If you already own a home, THIS IS GREAT NEWS! WOWZERS!
If you wish to own a home, you best follow your heart and make it work. And once you do, if you sell your new home in the future, you’re likely to make a nice profit.
Give me a call if you want to know where you stack up in the home buying fantasy realm, and I’ll be glad to help!