If you’re one of the millions aspiring to own a home, you’ve likely spent considerable time online browsing properties and prices, wondering, “How do people afford houses in this market?”
It’s a fair question, especially given the recent rise in home prices and interest rates. However, with some planning and preparation, there is a way forward, even in challenging times. Here are some tips and strategies to help you get closer to your dream of homeownership.
1. Use an Affordability Calculator to Gauge Your Budget
Starting with an affordability calculator is essential to determine how much you can afford based on your income, debts and down payment savings. This will give you an idea of a suitable home price and its monthly costs.
Pro tip: Adjust the affordability calculator figures to see how income, debts and down payment changes affect the price you can afford.
2. Get a Real-Time Estimate with an Affordability Calculator
Enhance your budget estimate using our affordability calculator. This tool offers a precise, real-time estimate of your buying power, considering your financial details and current market conditions.
Pro tip: Regularly update your information in the calculator to see how changes in market rates, credit score or down payment savings affect your affordability.
3. Understand Debt’s Impact on Mortgage Approval
Debt can significantly impact your ability to secure a mortgage. Lenders use your debt-to-income ratio (DTI) to assess whether you can manage monthly mortgage payments alongside your other debts.
Pro tip: Utilize a DTI calculator to see how paying off or taking on more debt changes your financial situation.
4. Use a Mortgage Calculator for Detailed Cost Insights
Once you have a home price in mind, use a mortgage calculator to understand how different down payments and interest rates affect your monthly payment.
Pro tip: Experiment with different scenarios to see potential savings or costs with varying interest rates and down payments.
5. Get Pre-Qualified for a More Accurate Budget
Pre-qualification estimates what you can afford based on your self-reported financial details. This step can help you focus your home search within your budget.
Pro tip: For a more precise estimate, get pre-approved, which involves a more thorough review by a lender and can strengthen your position as a buyer.
6. Consult with a Loan Officer
Loan officers can help you understand how different mortgage options affect your affordability and guide you through the loan process.
Pro tip: Shop around for lenders to find the best mortgage rate. Hanna Financial offers financing options, including fixed-rate, adjustable-rate, FHA and VA loans.
7. Improve Your Credit Score
Your credit score significantly influences the interest rate you qualify for. A higher score can lower your monthly payments and the total cost of the loan.
Pro tip: Read these tips on how to boost your credit score.
8. Compare Renting vs. Buying with a Calculator
Use a rent vs. buy calculator to evaluate whether it makes financial sense to buy a home based on your long-term plans.
Pro tip: Hanna Financial’s rent vs. buy calculator can help determine the “break-even horizon,” showing when buying becomes more advantageous than renting.
9. Work with an Experienced Real Estate Agent
An experienced agent can help you find good deals and write competitive offers in your local market.
Pro tip: Find tips on selecting a good real estate agent to assist you in your home purchase.
10. Use a House Hunting Checklist
Define your preferences for a home and neighborhood with a house-hunting checklist to stay focused during your search.
Pro tip: Use our Essential Guide to Buying a Home to help you navigate your home purchase.
11. Broaden Your Search to Different Markets
If you have flexibility in where you live, consider looking at housing markets where prices are more aligned with your budget.
Pro tip: Use Howard Hanna’s property search tool to find homes that fit your requirements. This tool can also be used to access a property’s public records.
12. Consider a Fixer-Upper
Dated homes or those needing repairs can offer potential deals if you’re willing to invest time and money in improvements.
Pro tip: Learn about finding and affording fixer-uppers to see if this option is right for you.
13. Explore House Hacking
Generate income by renting out parts of your home or buying a multi-family property where you can live in one unit and rent out the others.
Pro tip: Discuss with a lender about financing options for multi-family properties that may count future rental income towards your mortgage qualification.
14. Find Creative Ways to Save for a Down Payment
Consider using gifts or loans from family and friends or adding down payment funds to your wedding gift registry to boost your savings.
Pro tip: Check out these 21 creative ways to save for a down payment.
15. Research Low Down Payment and First-Time Buyer Programs
Look into down payment assistance and first-time home buyer programs that allow for smaller down payments.
Pro tip: Explore down payment assistance programs and talk to a loan officer about low down payment mortgage options.
By following these strategies, you can better navigate the housing market and move closer to your goal of homeownership.
Related articles: 5 Things Worth Compromising When Buying a Home, Expert Tips on How Buyers Can Win in a Seller’s Market, 10 Things to Look for in a Home Inspection
