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Finding It Impossible to Afford a House? 6 Ways to Turn It Around
If homeownership is at the top of your goal list, don’t make a move without checking out this guide to make it a reality.
If you’ve spent any time at all researching the real estate market lately, you can understand why anxiety levels have gone up for anyone looking to buy in the near future. Between inventory shortages and the increase in prices and interest rates, it’s no wonder house hunters are frustrated.
Although prices have been coming down slightly in most markets and inventory levels have gotten better, interest rates have remained flat. So how are people affording homes? Good question!
If you’re feeling the pressure to get into a home, here are three ways to prepare for your big purchase:
Put home prices in perspective.
When researching median home prices in the area you’re interested in, the numbers can be jaw-dropping! Keep in mind that the median is the middle—which means half the homes in the area sold below that price. If staying in that area is important to you, look for something smaller or a home that needs some TLC.Take a hard look at your financial picture.
Before you start looking at specific properties, you have to know how much house you can afford. It’s easy to feel pressured by home prices in your area, what you see on social media and what others you know are doing. Try to shut out all the noise and focus on your own financial situation—income, monthly bills, other debt, down payment, etc.
One rule of thumb is to keep your monthly payment to no more than 30% of your take-home pay.
- Understand available loan options.
There are several common types of mortgage loans to choose from—fixed vs. adjustable, 15-year vs. 30- or 40-year, FHA, VA, first-time homebuyer, just to name a few. The best way to find a mortgage loan that aligns with your financial situation is to talk to a professional. Chat with your financial institution or seek out a mortgage lender to get the details on all the options available to you.
One item to remember: It's likely your lender will approve you for more than you can afford. Just because you qualify for a higher amount doesn’t mean you need to take it. Stick to the 30% rule and your budget will thank you!
Once you consider all these points and come up with your homebuying budget, it may turn out you still can’t afford the house you want. Don’t worry—it can still happen! Here are three steps to get you into the house of your dreams:
Extend your saving period.
If, after looking at all the information above, you find your timeline and your current financial picture don’t align—in other words, you want to buy a home but your homebuying budget can’t currently support a mortgage—all is not lost. The financially responsible decision in this case would be to put the brakes on purchasing a home for now and focus on saving. In most instances, it’s better to continue to rent for a while, building up your savings, rather than getting into a situation that will stretch your budget too far and cause you more anxiety.Realign your expectations.
Every potential homebuyer has a list outlining the must-haves and nice-to-haves. Whether it’s written, digital or just in your head, you know what you’re looking for. If you’re having trouble finding a property that checks all the boxes, including falling within your affordability range, now is a good time to revisit your list. The one thing to remember here is that your first home will likely not be your forever home. In that respect, it doesn’t need to have everything on your wish list.
Take the time to reset your list. Then work with a real estate agent who is knowledgeable with the available homes in your area—you may be surprised to find out you still have some great options!
- Cast a wider net.
Of course, you know the location that would make you the happiest. But if it just isn’t feasible to buy a home in that area, you could entertain the idea of widening your home search. That may mean living further away from family or work but still close enough to commute. Or, if you live in a housing market you just can’t afford, it may mean relocating. The good news is, for many people, it only takes moving a few miles across a county line to find something in their price range. Keep your options open!
