TLDR:
- Homeownership is becoming more difficult for many Americans, but there are still ways to buy a home or plan for a future purchase.
- Building up a larger down payment can help you avoid paying private mortgage insurance on a conventional loan.
- Asking for a gift or loan from family or friends for a down payment is a common strategy among first-time homebuyers.
- Improving your credit score can help you qualify for better loan options and interest rates.
- Considering different types of mortgages, including government-backed loans, can help you get into the home you want.
- Working with a realtor early in the buying process can give you an advantage in a competitive real estate market.
- Remember that you can always refinance your mortgage in the future to get a lower interest rate or monthly payment.
According to the UKiah Daily Journal, homeownership seems more out of reach than ever for many Americans, especially for those who have been waiting for real estate prices to drop. However, there are still multiple ways to buy a home right now, or to position yourself for a future purchase. One key strategy is to build up your down payment. The higher real estate prices climb, the bigger you’ll want your down payment to be. Having at least 20% saved up as a down payment can help you avoid paying private mortgage insurance (PMI) on a conventional loan.
Another option is to ask for a gift or loan from family or friends. According to the National Association of Realtors’ Profile of Home Buyers and Sellers, one-fourth of first-time homebuyers used a cash gift or loan as a down payment in recent years. Depending on the type of mortgage, you may also be allowed to receive a down payment gift from your employer, a charitable organization, or a government agency that assists first-time or low-income homebuyers.
Improving your credit score is also important when it comes to buying a home. A better credit score can help you qualify for more home loan options and better interest rates. Steps to improve your credit include making all bill payments on time, paying down revolving debt to lower your credit utilization ratio, and refraining from opening new accounts or closing old ones.
It’s also worth considering different types of mortgages that could help you get into the home you want. Government-backed home loans, such as FHA loans, allow borrowers to put down as little as 3.5 percent with a credit score as low as 580.
Sporting a realtor early on in the homebuying process can also give you an advantage in a competitive market. A realtor can help you navigate the buying process, find available properties before they’re snatched up, and negotiate on your behalf.
Finally, it’s important to remember that high mortgage rates don’t have to be forever. Take out a home loan for the property you want when you’re ready and consider refinancing your mortgage when rates drop in the future. This can help you save money on interest and potentially qualify for a lower monthly payment.
