It’s getting harder and harder to buy a home, especially for younger folks who are still building up their savings and working on their credit scores. The financial strain of the pandemic, student debt, and record-breaking inflation have left many unable to afford a down payment or qualify for a mortgage. But with some creative planning and a few unique personal finance hacks, you can buy a home and start building equity. Here’s what you need to know, courtesy of America’s Loan Company
Work With a Great Real Estate Agent
First, you need a great real estate agent. Your real estate agent will work with you to find homes that are available within your budget. They can also help you review your financial situation and make suggestions that will increase your chances of getting your mortgage approved. Not only that, but NBC News explains that a great real estate agent will negotiate the best buying price for you and can even help you land extras like closing costs and repairs that typically fall to the buyer. Look for an experienced real estate agent who knows the local market inside and out!
Learn About Your Mortgage Options
Getting pre-approved for a mortgage is important if you want to move fast in this hot housing market. Take the time to evaluate your mortgage options and apply for a loan that best fits your needs. For example, you’ll have to decide between fixed-rate and adjustable-rate loans. Understanding your various mortgage options is essential! It’s also important that you understand how lenders decide whether or not you qualify for your desired loan amount. For example, they’ll look at your credit score, credit history, annual income, employment records, and existing debt amounts. Make sure all of these criteria will show lenders that you’re responsible with money and can afford that monthly mortgage payment.
Research Local Real Estate Trends
Next, research the local real estate trends in your area. This will help you determine just how much you need to save for a down payment as well as what kind of mortgage you will need to qualify for. Do your own research instead of relying on personal anecdotes or sensationalist news stories. For example, listings in Utah have increased by 7.5% over the last year, and the median home price has risen as much as 26.8%. Even though we’re facing a recession, the housing market in Utah is still very much thriving!
Consider 100% Financing
Did you know that you can get a home loan with no down payment? This is known as 100% financing and is a method younger buyers often use to purchase property when their savings accounts are still in their infancy. Certain mortgage types don’t require a down payment, including USDA and VA loans. If you don’t qualify for these mortgages, look into down payment assistance programs that provide no- or low-interest loans to help cover your down payment.
Invest in a Home Warranty
Another way you can save money in the long run is by investing in a home warranty. Basically, a home warranty covers damages that may occur to your home’s major appliances, like your HVAC system. Right away, you’re probably asking: is a home warranty worth it? In most cases, the answer is yes because repairing those major appliances can easily empty out your bank account. For instance, the average repair cost for an HVAC system can be upwards of $5000 or more!
Create an Aggressive Saving Plan
Saving for a down payment will reduce the amount of interest you pay over the lifetime of your home loan. Create a budgeting plan that will help you save aggressively. For example, Wealthsimple.com suggests eliminating small, habitual purchases from your spending habits, like eating out and buying coffee on the go. You can save a lot of money every month just by cutting out everything you don’t need. If you can find a way to save on rent, even better! Consider moving into a smaller, cheaper place or splitting your housing expenses with a roommate.
While it may be harder for you to buy a home than it was for your parents, home ownership is still an accessible dream. You’ll just have to work a little harder to save up for a down payment, qualify for a mortgage, purchase a home warranty, and find a place that meets your needs. With some good foresight and planning, you can get your finances in order and finally buy that home of your dreams!
Article written by Christopher Haymon for America’s Loan Company.
America’s Loan Company is a trusted direct lender that provides affordable personal loans in Columbus, Ohio, and throughout Ohio to people with less than perfect credit. Call 877-380-2639.