The Definitive Guide to Buying Your First Home

The most important mental shift to make if you want to buy a home, according to Barbara Corcoran

Home prices and mortgage rates are on the rise. In many housing markets, it's cheaper to rent than buy. Still, according to Bank of America's 2018 Homebuyer Insights Report, millennials want to own: A full 72 percent of millennials list owning a home as a top priority, compared to 50 percent who list getting married as a top priority and 44 percent who say having children.

Experts like Barbara Corcoran and David Bach encourage young people especially to get into the real estate game. Bach says that not prioritizing homeownership is the single biggest money mistake millennials are making and, according to Corcoran, "the faster you buy your first home, in my opinion, the better."

Your odds of becoming a homeowner sooner rather than later may improve if you make one key mental shift, Corcoran tells CNBC Make It: You probably need to "lower your standards," she says, and start small.

"If you're thinking about buying your first one-bedroom, change your thinking," she suggests. "Buy your first studio instead. If you can't afford a good studio, buy a little studio. The reason being is you want to trade up."

Barbara Corcoran attends the premiere of ABC's 'Shark Tank' Season 9
Rodin Eckenroth | Getty Images
Barbara Corcoran attends the premiere of ABC's 'Shark Tank' Season 9

In many cases, the cost is what holds young people back from buying: According to an analysis by MagnifyMoney, the down payment is the biggest obstacle to homeownership.

If you can't afford a down payment on your dream home, but you could manage the one on a smaller place, start there, advises Corcoran. After all, she says, "every single person who is living in a multimillion-dollar home started with something smaller that they didn't find acceptable."

The key, she says, is to "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."

And 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 says. Some experts, like Bach, say a down payment of 10 percent is OK, though more is always better.

You can also look into Federal Housing Administration (FHA) loans, Corcoran 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."

"Lower your standards. Get something small so you have a chit in the game." -Barbara Corcoran

Corcoran, who made her fortune in real estate, has regrets about how and when she got started. "When I bought my first studio in New York City, I got cold feet and didn't close and relinquished a 10 percent deposit which took me three years to save," she says. "And you want to know what happened? I couldn't get back into the market for almost eight years."

That meant that "by the time I had the money for a one-bedroom, it only bought a studio, and it just went on and on and on and left me behind," she continues.

"What I learned from that experience is: The minute you can afford something, plunk the money down and get in there."

Don't miss: The 4 biggest mistakes first-time homebuyers make, according to real estate mogul Barbara Corcoran

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