Having a place of your own, a house that you call home, a residence where you plan your future, a cozy environment that’s peaceful when you unwind after a stressful day—that’s a dream worth striving for, and most of us do strive for it. However, when you look at expensive home prices (median prices beginning at $250k), the thought of buying your first home can seem daunting.
This worry can occur regardless of which stage of life you find yourself in. There’ll be a time when you’ll buy a house, and these tips will help you.
Pay Your Debts
Before you can save money, you need to get rid of debts. Debt doesn’t lead toward financial freedom, especially credit card loans with compound interest rates. Try to minimize your liabilities wherever, and whenever possible. You might be carrying different types of loans, including student loans and credit cards. It might take some time to enjoy a debt-free life, but you need to take baby steps. Slowly, but gradually you can reduce your debts, and you’ll thank yourself later for this effort.
Focus on Earning More
Most people think otherwise, but earning more can sometimes be easier than saving more. You don’t need a new income source, but you can consider ways to make an additional $50, $100, or $200. An extra $100 per month is enough to change the trajectory of your financial life. You can use it to pay down debts or save it for the down payment for your new home. The snowball effect is helpful because once you start earning a few more dollars, you can push the button further to make more.
This strategy always works because there is a limit to how much you can save. You can try to keep 100% of your money (which is next to impossible), but with the right plan, you can increase your income by 110, 120, or maybe 200%. It’s a different approach but can lead to you gaining traction on increasing your income. This strategy is better than working hard to save every penny.
Improve Your Credit Score
Your credit score plays a crucial role in your home buying experience. A high credit score gives you access to favorable interest rates and quick approvals. You can buy a house fast by paying less.
On the other side, a low credit score makes it challenging to qualify for a mortgage. Lenders will impose high-interest rates, and it takes them forever to approve the application. Before applying for a mortgage, focus on improving your credit score. If you have taken care of the debts, you should have already upgraded your credit score. Still, it’s always better to check the credit report and see which steps are required to take your score to the next level.
Settle Into a Smaller Home
Going into excessive debt is never a good idea, and saving thousands of dollars for the down payment seems like an exhaustive task. For your first home, do you best to avoid spending over your set budget. Try to invest in a smaller home that requires a low down payment. Let’s say you can qualify for a mortgage valued at $400,000 max. That does not mean you need to buy a house worth that exact amount. You can settle for a house priced at $200,000, pay 20% down, and keep the remainder of your savings for other things. You can pay your mortgage quickly and build equity in the house. Once you pay down enough, you can sell your current residence and invest in a better (or bigger) property.
First Time Homebuyer Programs
As a first time buyer, you are in a unique position. You can tap into programs that are designed for you with exclusive perks. These programs are not always advertised, and you need to contact a local expert to inquire about these. However, a suitable program can get you affordable rates, even with a low credit score or down payment.
Alex Capozzolo is the owner of the Brotherly Love Real Estate blog and a content writer for the real estate industry. We buy houses in Philadelphia, PA. Our focus is on helping people through one of the most important investment decisions of their lifetime by seamlessly providing fast, honest, and professional real estate services.