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A letter to my past self, a first-time homebuyer

It’s hard to imagine I’ve been a homeowner now for 22 years.  But like most of us, I’m sure, I remember that first home purchase like it was yesterday.  Having been in banking for my entire career, thirteen in the mortgage business, I thought a letter to my past self, a first-time homebuyer, would be a great way to pass along some advice to not just other potential new buyers, but to parents looking out for those twenty- or thirty-somethings looking to buy in the not-too-distant future.

Dear Younger Self,

So you’re looking to buy a home.  Great decision, first of all.  You’ll enjoy the pride of owning it.  Homeownership offers you some intangibles that are difficult to recognize until you move in, meet the neighbors and embrace that sense of community.  Beyond that, though, I’d consider the following five tips as you embark on this journey:

Don’t try this alone. Yes, you can find homes and lenders online.  But ask your parents or a well-trusted advisor for a few realtor and lender contacts who can make this seamless.  You’ll encounter some bumps along the way and buying a home is an emotional process.  These experienced professionals have likely seen it all and will escort you to the ultimate goal.

Non-traditional credit counts Sure, the payments you’re making on a student loan or credit card matter.  When it comes to traditional credit, do what you can to avoid borrowing more than 50% of your limit on a credit card.  Non-traditional credit can really make a difference, too.  Monthly payments of rent, insurance and utilities work in this sense.  Just be able to document recurring payments from your account.

Save enough Yes, you need a down payment.  But also set enough cash aside to cover repairs and improvements.  Making a house your home brings even more satisfaction.  Consider a limited down payment so you can keep some cash for this purpose.  Or, budget a regular amount for reserves.  

Learn how to be handy You’ll save thousands by investing a few hundred dollars now in a great set of tools.  And don’t hesitate to ask neighbors to share theirs.  With the internet full of “how-to” videos, all it takes is a little courage.  You’ll make mistakes along the way.  But also know when it’s time to bring in an expert. 

Consider a duplex.  I know.  You don’t want to be a landlord and live next to other tenants.  But it’s not as difficult as you think. Ask some advice of your realtor or lender and you’ll get plenty of help along the way. Low down payment options exist from local lenders like Great Midwest Bank who also can offer a great WHEDA product.  The best part?  You save on your monthly housing cost and the leftover funds can be set aside for ongoing repairs and improvements, instead of coming from your pocket. 

Don’t be too nervous; this is going to be great.

Sincerely,

Older, Wiser Self

Buying your first home is a complex process with a lot of moving parts. Great Midwest Bank offers valuable resources at no charge to all first time homebuyers, to help you make good decisions along the way. Learn more here.

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Jon Reetz is a graduate of the UW-Madison Business School ('90) and the Kellogg School of Management at Northwestern University ('98). His 25 years of banking experience include 12 in commercial lending and the past 13 with Great Midwest Bank in Brookfield, which specializes in both owner and non-owner occupied residential mortgages.

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