As the years pass, it gets harder and harder for people to acquire a house. In this article, you’ll get to know the top information that could help you get a hold of your own home this year!
First, you need a good-paying job to finance the down payment and closing costs. Next is, you should consider buying an affordable home. Also, you should seek the mortgage you qualify for. It is also a big help if you have someone, your partner or family, to help you pay the fees.
First and foremost, you should consider your salary when buying a house. Find a job that can afford to pay for a down payment, mortgage, debts, etc.
A stable and consistent income is very important. This would matter in applying for your home loans.
Moreover, income verification is carried out by banks or lenders to determine if you are permitted a mortgage.
Your career should progress over time, where you can pay for your monthly mortgage and your daily necessities.
Purchasing a home is a big commitment that requires discipline and planning.
Cheap housing is hard to come by nowadays. But it’s just a matter of knowing where to look and what to look for.
For the “where,” the location of your house matters since different states in the US have different median house pricing
Some states have high prices while others have low.
This is determined by the median household income in that state. Additionally, one could have a house anywhere in the country with the same budget, but they would differ in the house area.
For the “what,” we could get into the options for the homes you can afford.
Newly-built houses would cost you a fortune. You can opt to look into cheap, pre-loved houses such as those from your family, fixer-uppers, short sales, and foreclosures.
Maybe a relative is thinking about selling their previous home and buying a new one. The cost of that home can be relatively cheaper.
Plus, you could easily negotiate with the pricing and get them to give you a good deal because, well, they’re family.
Another option is a fixer-upper. These houses are still a great deal sound and stable and just need a little bit of tweaking in the visual department.
Renovations might cost you money and time, but fixer-uppers can give you large savings overall.
You could also seek houses through short sale or foreclosure. Short sales are those you still buy directly from the owner but with control from the bank or the lender.
They supervise the sale and decide if the property can be sold at less than the previous owner’s balance.
Meanwhile, those that fail to be sold through a short sale are foreclosed. The bank or the lender takes hold of the ownership of the property and puts it up for an auction.
Although with this option, you must beware of the state of the house since there’s no occupant to have kept the place. There is also the risk of being outbid.
You could buy a house immediately and pay for parts over time through a mortgage. But with applying for one, you should consider your financial health.
Lenders look at your income and debts to know if you’d be able to consistently pay them back. And then assess whether to allow you a mortgage and what kind to give you.
Based on Investopedia, you should be able to afford a mortgage that is about 250% of your current annual gross income.
The payments for your monthly mortgage rely on different factors for different lenders, but all take your credit score into account.
A credit score is a rating that is based on your credit risks. Lenders use this to identify what credit offers they can give you.
If you obtain a high credit score, your down payment would be lowered, almost only 3% of the full house price. These scores ultimately depend on your existing credits, the amounts you owed, and the history of your payments.
To maintain a good credit score, you should always check your existing accounts. Make sure everything is accurate, and all bills are paid on time.
Another factor of financial security is a good debt-to-income (DTI) ratio. This is a standard used to confirm if the buyer has the capabilities to pay for the monthly mortgage.
As its name suggests, it is computed by dividing your monthly debt by your monthly income. An ideal DTI ratio is 36%, but you could still qualify for a mortgage even with a ratio of about 40%.
According to the real estate company Zillow, the median price for a home in the United States during February of this year is $325,677. Additionally, the listing price for houses is said to have increased to about 20% compared to the same time last year.
This rise is due to the effects of the Covid-19 pandemic. The demand for homes skyrocketed while the housing inventory became extremely low.
Houses have been hard to come by, with listings sold just hours after being posted. Zillow predicts a continuous increase in the market price of houses in the US of about 17.3% for 2023.
The World Population Review gave data on the median house prices per state in 2022.
Hawaii is the state with the most expensive median home price amounting to $638,388. Meanwhile, the state with the lowest median price is West Virginia, with a total amount of $107,927.
If you are interested in buying a house, you need the right cash and steady income to afford one. The prices currently are at an all-time high because of the worldwide economic crisis caused by this pandemic.
With the median housing price, today being more than $300,000 and with a minimum cost of living of about $1500 per month, you should have a minimum salary of about $14,000 for the past two years.
This doesn’t take into account other miscellaneous expenses. It may seem a lot but do not fret because other options are available for you.
If you do not have that much cash in hand, getting a mortgage is your alternative. To avail of one, there are certain standards that you must achieve.
Once the requirements are accomplished, you discuss your terms with a mortgage officer.
With the option of getting a mortgage, one doesn’t necessarily need a minimum salary to afford a house. Below are what you need in securing a mortgage.
A down payment is a part of the full purchase price paid upfront in cash.
The amount can decide everything on your loan, how much the lender is willing to give you, what mortgage you are eligible to get, and the terms and conditions.
You should be ready to pay upfront for a down payment.
Opening your savings account to pay the down payment for your dream home could be the start.
A good and stable income is important to support the demand for saving for a down payment. Set aside a part of your monthly salary and put it into your fund.
Keep to that habit as consistently as possible, and you’ll have your down payment in no time.
Having just one job could still pose a challenge in keeping up with your monthly budget. By having a second job, you could increase your income.
Part-time jobs and side gigs could just be the push you need to fill up your down payment fund as soon as possible.
Another way to help you save up is to reduce your unnecessary expenses. Maybe you can cut a little out of your daily coffee runs or even go as big as finding a smaller apartment. These things
Some parents, or even grandparents, gift their children cash to cover some, if not all, of their down payment.
Families often feel strongly about homeownership and see this as part of a successful life.
Lenders are open to these gifts for a down payment. But there are still rules to be followed when getting a grant.
You should secure a paper proving that the money is from your family and is really for you. And the money should be a gift and not a loan disguised as one.
Now you know how to save for a down payment, but how much do you need to afford it?
Generally, 20% of the total purchase price is needed as a down payment, which is roughly $60,000 if you consider the median price of houses right now.
Depending on the negotiation with your lender, you can pay for less, but this may hurt you in the long run because you will need to pay with a higher interest rate.
If you are having trouble paying for your down payment, certain down payment assistance programs may help.
These are secondary loans at a 0% interest rate, and you won’t have to pay them back as long as you live in the property for a certain amount of years.
These are secondary loans that are not forgiven, meaning that you have to pay them, but you can choose to pay after you have settled your primary mortgage.
First-time Buyers Incentives
Many benefits are offered to first-time buyers, like a lower interest rate or a lower closing fee. So make sure to avail them if you are buying a property for the first time.
Grants are money lent by the government or an organization and may assist you in your down payment.
If granted, you will have cash in hand, but you need to clearly understand the contract between you and the organization.
Individual Development Account (IDA)
The IDA is a government program for low-income families where you deposit a certain amount into a bank, and the same amount will be matched by donations from the organization or government.