Top 4 Tips in Home Affordability
Home buying hurdles exist — but research, creativity, and flexibility will help you clear them.
Homebuyers today face tough challenges — housing prices have soared, a dollar doesn’t go as far as it once did and rent is more expensive than the past. How are people today making such a large purchase despite these hurdles?
With more flexibility and a bit of financing creativity, today’s buyers are finding ways to achieve homeownership.
Know your options (and credit score)
The first step to knowing if you can afford a home is figuring out what financing options are available to you, including what mortgages you’re eligible for and how much you need (and can afford) to put down upfront. Learning the minimum FICO score required by lenders and understanding your own credit score are important starting points.
Before buyers even start thinking about saving for a home, they should know what their financial resources are and if they’re eligible to buy.
Make enough money to save
With fewer resources to pull from than their older, wealthier counterparts, renters wanting to buy face tough financial headwinds. While there are ways to enter into homeownership without making $75,000 in household income, it’s hard to afford to buy if you make significantly less. “If you’re making $37,500 per year, it’s probably not feasible for you to buy in almost any market,” says Zillow Chief Economist Dr. Svenja Gudell.
While households purchasing homes are more likely to have two incomes than renter households (and thus a higher median household income combined), even two-income households struggle to afford to buy in competitive markets.
Save enough cash (but not as much as you think)
One of the most daunting parts of home buying? The down payment. In fact, two-thirds of renters cite saving for a down payment as the biggest hurdle to buying a home, according to the Zillow Housing Aspirations Report. “The down payment remains a hurdle for a lot of people,” says Gudell. “But they should know they don’t have to put 20% down.”
Know your deal breakers, but be flexible To get into a home — even if it’s not the home of their dreams — some of today’s buyers are considering homes and locations outside of their initial wish list and getting increasingly flexible when it comes to the neighborhood, house condition, and even home type.
Affordably priced homes do, in fact, exist. But in popular areas, where people most often want to live, it’s going to be harder to find that cheaper home, Gudell says.
Author: Brittan Jenkins