Are you having trouble finding a home that fits your needs and your budget? If…
According to a recent Harris Poll survey, 8 in 10 Americans say buying a home is a priority, and 28 million Americans actually plan to make their dream of homeownership a reality within the next 12 months. Homeownership provides many financial and nonfinancial benefits so that interest is understandable.
However, it’s unlikely all 28 million Americans will accomplish that goal in the coming year. Experts project that a total of around five million homes will be sold in 2023. Why is there such a big difference? It’s partly because there can be challenges to buying a home.
In the same survey, when asked, “Which of the following are preventing you from pursuing homeownership at this time?”:
- 34% answered, “I don’t have enough saved for a down payment”
- 30% answered, “My credit score”
If your goal is to buy a home, here’s what you need to know to make your dream of homeownership a reality.
Save for Your Down Payment
Your down payment is a significant chunk of what you pay upfront for your home. For most home purchases, buyers put down some amount of cash up front (a down payment) and then take out a loan (a mortgage) to pay for the rest. Depending on the type of mortgage you get the amount of your down payment will typically range from 3.5% – 20%.
It’s a longstanding myth that you need to pay 20% of the purchase price for your down payment. In reality, 20% down isn’t always required. In fact, according to the National Association of Realtors (NAR), today’s median down payment is 14% for the average buyer and just 6% for a first-time buyer.
Regardless of how much money you can save for your down payment, know there’s help available. A local lender can show you options to help you get closer to your down payment goal. Plus, there are even loan types, like FHA loans, with down payments as low as 3.5% for some buyers, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.
And, many states and localities have down payment assistance grant programs available to help first-time home buyers. Many of these programs can also help with closing costs. Beyond assistance programs and different loan types, here are a few other tips to help you as you save for your down payment:
- Remember to factor in closing costs. In addition to your down payment, closing costs are usually 2-5% of the home’s purchase price.
- Maintain your savings. Your down payment shouldn’t deplete all your savings. It’s important to still have some money set aside for homeownership expenses after you move in.
- Explore your options and lean on your trusted advisor for expert guidance. Do your research, ask questions, and look into the resources available for buyers like you.
Improve Your Credit Score
Your credit score is a number that indicates how financially reliable you are to lenders. A higher credit score usually means you’ll be able to borrow more money at a better interest rate. If your credit score is preventing you from getting an affordable mortgage, there are steps you can take to improve it.
Here are two:
- Pay your bills on time. When you pay your bills on time, your credit score improves. When you’re late, it takes a hit. One way to make paying your bills on time easier? Set up automatic payments when and where you can.
- Mix it up. From auto loans, to credit cards, to mortgages – there are several different types of credit. And having a mix of them improves your credit score.
At Troy City Mortgage we’ve been simplifying homeownership since 2017. Working with us you get access to top-notch experts with local roots. We live in the communities we serve, and we take pride in helping people become homeowners. So, if you want to purchase a home this year, let’s connect so we can pre-qualify you for a mortgage and, if you’re a first-time home buyer, connect you with a down payment assistance program.