With a competitive housing market and in a high cost of living area, it can be difficult to afford a home. Depending on your salary, you may be putting a large portion toward rent payments each month and you may have a difficult time putting away money away. Purchasing a home has many advantages since you are building equity and increasing your savings when you purchase instead of throwing the money away on rent each month.
However, depending on where you live, you may find it difficult to qualify for a mortgage or to afford the monthly mortgage payments. Here are seven practical suggestions on what you can do to help you afford to buy a home.
1. Save Up a Down Payment
One option is to work on saving up a larger down payment so that you can buy the home that you like. A larger down payment will decrease the amount you need to borrow for the home, which means that you can buy a more expensive home if you have a larger down payment. Saving up a down payment can help you determine that you are ready to buy a home.
If you are struggling to come up with the savings, you may want to get creative in the way that you handle your money. Consider living with roommates for a few years so that you can put more money into savings for a down payment. You can also funnel all of your gifts and bonuses into this fund to help you reach your savings goals more quickly.
2. Find a Property With a Rental
Another option is to look for a property that will allow you to rent out a portion of it to help cover the mortgage. If you live in a high cost of living area, you may be able to rent it out for enough to cover a good portion of your mortgage. If you do this option, you should have a few months of your mortgage payments saved up so you can cover the time between renters and any repairs that you may need to take on.
3. Look in Other Areas
Another option to help you save on a home is to consider looking in other areas. Usually within a city there are more affordable options if you are willing to commute a bit longer each day. Another option is to consider looking for a job in a lower cost of living area so that you can find a home that you like. You may be surprised at just how much a smaller community can still offer.
4. Be Willing to Fix It Up
Often you can find distressed properties at more affordable prices. The key is to find one that you can live in while you fix it up or to have enough money on hand to make it livable. If you are comfortable doing the work yourself, you can put in sweat equity and quickly raise the property value of your new home. It is important that you make sure everything is up to code, and you may want to still pay for an electrician and a plumber since these issues can affect the overall safety of your home.
5. Apply for Home Buyer’s Assistance Programs
There are a number of national and local home buyer’s assistant programs that can help you qualify for a mortgage, especially if you are a first-time home buyer. HUD is a good place to start but the USDA has a program that you may qualify for if you live in a more rural area.
Many states and counties also have assistance programs that you can use to help with a down payment or closing costs. Start by looking locally and expand to a nationwide search. Depending on your circumstances, you may also want to consider Habitat for Humanity.
If you are worried that you will not qualify for a mortgage due to a low credit score, you may want to look into an option that will allow you to rent-to-own your home. It is important to read all of the fine print when you do this and go through a home inspection before you move in. It should blear what you are responsible for repair wise and what happens if you choose to move out. While this can be a good program, some people take advantage of the renters’ and it does not always work out.
7. Alternative Loans
You may want to consider alternative loan options that are available.
There are the more traditional options like an FHA or Veterans’ Home loan. These are straight forward and may help if you do not have a down payment or a lower credit score. There are also housing co-ops that will help you finance a home. However, these co-ops also claim a portion of the equity of the home and you must offer to sell the home to them if you decide to move. Again you should carefully read the fine print and consider whether it is worth chances to get into a home.