Nearly half of house hunters don't think they can afford a home — these 4 tips can make it possible
The study found that more than half (56%) of potential buyers aren’t sure they can afford as much home as they planned.
Some are making concessions on square footage, while others are rethinking neighborhoods and school districts. Nearly a third of buyers (30%) said that they are counting on money from family to help them seal the deal.
If you’re having trouble affording your dream home, there are several tips to make that dream a reality.
Bulk up your savings
In 2023, the average down payment for first-time homebuyers was 8% of the home’s full price, according to an association. That’s the highest they’ve been since 1997. For repeat buyers, the average down payment was 19%, the highest since 2005.
With housing prices still inflated, that can put a down payment out of reach for many.
One way to get a down payment together faster is with a high-yield savings account (HYSA), which can accrue up to 6% interest annually. While there are other ways to invest, most HYSAs allow you to withdraw funds at any time with no penalty.
Improve your credit
The better your credit score the more likely you are to get attractive mortgage terms. There are mortgage options for borrowers with credit scores as low as 500, but you’ll likely have to put a lot more down and face much higher interest rates.
A FICO score of 620 is the minimum for a conventional loan. Even if you’re doing better than that, taking time to work on improving your credit score could cut your mortgage by hundreds of dollars a month. Focus on making on-time payments, polishing off existing debts and keeping your credit utilization under 10%.
Apply for grant and loan programs
States, cities, and financial institutions all sponsor programs to help homebuyers. Many are geared toward first-time buyers or those in lower-income categories.
Secure an assumable mortgage
If high mortgage rates are the main obstacle, you can try to get an assumable mortgage. Under this arrangement, the buyer takes over the seller’s mortgage at the same interest rate.
Even when mortgage rates and home prices are high, steps like boosting your down payment savings and credit score can get you closer to financing your dream home.