Buying a home is getting more and more difficult, especially for younger people who are still building their savings and working on their credit scores. The financial stresses of the pandemic, student debt, and record inflation have left many people unable to afford a down payment or qualify for a mortgage. But with some creative planning and some unique personal finance hacks, you can Can Buy a home and start building equity. Here’s what you need to know, courtesy of the American Loan Corporation
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 available homes within your budget. They can also help you review your financial situation and make suggestions that will increase your chances of getting approved for your mortgage. Not only that, but NBC News makes it clear that a great real estate agent will negotiate the best purchase price for you and can even help you get extras like closing costs and repairs that would normally be the buyer’s responsibility. Find 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 quickly in this housing market. Take the time to evaluate your mortgage options and apply for a loan that best suits your needs. For example, you will have to choose between fixed rate loans and adjustable rate loans. Understanding your different mortgage options is essential! It is also important to understand how lenders decide whether or not you qualify for the required loan amount. For example, they will look at your credit score, credit history, annual income, employment records, and current debt amounts. Make sure that all of these criteria show lenders that you are responsible for the funds and that you are able to afford the monthly mortgage payments.
Research local real estate trends
Next, research local real estate trends in your area. This will help you determine how much you need to save for the down payment as well as the type of mortgage you will need to qualify for. Do your own research rather than relying on personal anecdotes or sensational news stories. For example, listings in Utah have increased by 7.5% over the past year, and the median home price has increased by as much as 26.8%. Even though we are in a recession, the Utah housing market is still very booming!
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 that younger buyers often use to purchase properties when their savings accounts are still in their infancy. Some types of mortgage do not 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 to invest in a home warranty. Essentially, a home warranty covers damages that may occur to major appliances in your home, such as your HVAC system. Right off the bat, 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 your bank account. For example, the average cost of repairing a HVAC system can be upwards of $5,000 or more!
Create a solid savings plan
Saving for the down payment will reduce the amount of interest you pay over the life of the home loan. Create a budget plan that will help you save powerfully. For example, Wealthsimple.com suggests eliminating the usual small purchases from your spending habits, like eating out and buying coffee on the go. You can save a lot of money each month just by cutting out everything you don’t need. If you can find a way to save on rent, even better! Consider moving to a smaller, cheaper place, or splitting housing expenses with a roommate.
While it may be more difficult for you to buy a home compared to your parents, home ownership is still an attainable dream. You’ll just have to work a little harder to save for the down payment, qualify for a mortgage, buy a home security, and find a place that meets your needs. With some foresight and good planning, you can get your finances in order and finally buy your dream home!
Article written by Christopher Hymon for the American Loan Corporation.
American Loan Corporation is a trusted direct lender providing affordable personal loans in Columbus Ohio and throughout Ohio to people with less than perfect credit. Call 877-380-2639.