When you’re looking at houses and mortgages, then look at your monthly income and start to panic, you likely think that there is no way you can afford a house (especially if you’re one of those SoCal home buyers in Los Angeles!). You’re probably not the only one. Luckily, there are a few solutions out there that could help you!
Can’t Afford a House? Think Again
Trying to purchase a property, whether it’s your first one or fifth one is stressful. With the fluctuation of interest rates, increasing housing prices, and a market that is more favorable for a seller than a buyer, it can be intimidating to start planning your future home.
However, you don’t have to let these and other problems stand in the way of buying a home. Take a look at some of the following points on how you can still afford a house, even if you think you can’t.
Can’t Afford the Down Payment
For many, fronting the down payment for a mortgage is the hardest part about purchasing a home. Some loans require 20 to 30 percent of a down payment. Even if you’re looking at a $100,000 house, that is still anywhere $20,000 to $30,000 that you need. That is a lot of money.
However, it is possible to lower your down payment to a more reasonable amount that you can afford. The catch though is that you’ll have a bigger mortgage that will take you longer to pay off, and in return, having to pay more in interest.
Related: Your House is a Terrible Investment
Too High of Interest Rates
Speaking of interest rates, it can be hard to continue to pay your mortgage each month when you have additional money getting tacked on due to interest rates. There is a loan option though that tends to have quite low-interest rates that are more affordable.
A USDA loan that the U.S. Department of Agriculture has some of the lowest interest rates around. That means you can get a mortgage at a reasonable price that won’t break the bank. On top of that, USDA mortgage insurance has some of the cheapest fees compared to conventional mortgages and insurance.
Poor Credit Score
A bad credit rating is definitely a big hurdle to overcome so that you can get a mortgage, or any loan for that matter. Your credit score tells the lender if you are reliable to keep making your monthly payments or not.
Although getting your credit score to where you need it can take time, it is possible to start increasing your credit score right away.
- Start by paying all of your bills on time.
- Avoid getting a credit check unless you need to (credit checks actually drop your score).
- Live frugally for a little while until you can pay off your consumer debts.
I Can’t Afford What I Want
One of the most difficult aspects of buying a house is looking for one that you want and can afford. It’s easy to start dreaming about that mansion on top of the hill until you see the price tag.
The easiest way to avoid this kind of disappointment is to figure out your price range before you start to look. That way you narrow down your options to what fits in your range, and avoid the disappointment of falling in love with something you just cannot afford.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.