According to the 2024 Home Buyers and Sellers Generational Trends Report, many millennials use their savings for a home purchase’s down payment. Others, mostly younger millennials, use gifts or loans from friends and family more than any generation.
At the same time, younger millennials had the highest share of student debt at 41 percent. These loans can make it challenging to purchase a property.
With median home prices fluctuating this year, purchasing a home may be a distant dream for first-time buyers. For existing homes, the median price is set to swell to $407,000 in 2025. New properties will be significantly higher due to their modern fittings and energy efficiency.
So, here are ways to make the home-buying process more affordable without exhausting your savings or taking out gifts and loans from loved ones:
Save More Money
Most properties are purchased with a mortgage loan. You’ll also need to pay a down payment upfront.
Down payment prices are between 3.5 and 20 percent of the home’s purchase price, depending on the loan type. Although there are zero-down options, they may have restrictions.
As such, saving more money now can help you pay for these costs. So when you pay the minimum down payment, you’ll pay less over the loan’s lifetime. And with a larger down payment, you can get better interest rates.
Consider banks with online banking platforms that offer competitive rates. You can save on a high-yield savings account to help you grow your money.
Review and Improve Your Credit Score
Your credit history impacts your mortgage loan approval and repayment terms. A good credit can qualify you for a loan with the best possible rates.
For this reason, regularly checking your credit score is crucial in keeping your credit in good standing. Make regular, on-time payments—especially for debts—to maintain or increase your score.
Generally, lenders’ credit thresholds are between 650 and 680. However, having a credit score of 700 and above can get you the most favorable rates.
Although having or losing a job doesn’t impact your credit score, staying employed is crucial. Your employment income can affect your ability to access credit because lenders consider this information when approving or extending your credit.
Get Pre-approved
Mortgage pre-approvals involve checking your credit and verifying your assets and employment. When you receive a pre-approval letter, the lender is willing to lend funds, while further confirmation of details is pending.
A pre-approval is typically valid for 60 to 90 days. Within this period, you can shop for properties and show sellers you’re a serious buyer.
You can also get a prequalification for an estimated amount based on the information you provided. This estimate lets you know how much you can spend on a property. Getting prequalified with at least three lenders is helpful to find the rates you can afford.
Research Your Local Real Estate Market
Your local real estate market significantly influences home prices and mortgage rates. Interest rates fluctuate, the demand can be high while the supply is low, and some areas may not be experiencing positive growth and development in property values.
You should also consider local economic indicators, such as infrastructure development and employment rates.
Understanding these real estate elements will help you gauge the best location, property, and buying time. This research will allow you to make well-informed decisions that ensure a successful home investment without outrageous costs.
Explore Different Financing Options
Here are financing options to help make your home purchase more affordable:
FHA loans
FHA loans are mortgages backed by the Federal Housing Administration (FHA). The FHA doesn’t lend the money—private lenders do.
These loans offer the following perks:
- Down payments as low as 3.5 percent
- Lower credit score requirements than most conventional loans
However, FHA loans have a maximum amount that varies by country. If you have good credit, the loan tends to be more expensive. Otherwise, FHA loans can be the cheapest option.
So, before you apply for FHA home loans, review your eligibility to understand the potential terms you’ll receive.
VA and USDA loans
VA loans are loan programs backed by the Department of Veterans Affairs (VA) for veterans, servicemembers, and their families.
With a VA loan, you may have no down payment—as long as the price doesn’t exceed the appraised value. There’s also no private mortgage insurance (PMI) requirement. The VA may even offer assistance if you’re experiencing temporary monetary hardships.
However, maximum loan amounts vary, the interest rate may be higher, and you may be required to pay one to three percent VA loan funding fee.
Meanwhile, USDA loans are mortgages by the United States Department of Agriculture (USDA) for low-income residents of rural areas. You can receive a federal guarantee from a commercial bank or the government. Both are zero-down-payment loans.
However, USDA loans’ disadvantages include:
- Location limitations
- Income restrictions
- No adjustable-rate loans
Grants
First-time homebuyer grants are financial assistance for low- or moderate-income earners. They are cash rewards that don’t have to be repaid. These grants include:
- Down payment assistance – Down payment grants can range between $5,000 and $15,000.
- Closing cost assistance – Grants may provide one lump sum for down payment and closing costs. Or they may only cover two to five percent of the closing costs, such as title insurance, recording fees, and home appraisal.
Down payment assistance also includes employer-assisted housing (EAH) programs. These options provide qualified employees with funds for down payment and closing.
You can find grants from the following entities:
- Federal and state governments
- Financial institutions
- Non-profit organizations
Consider a Fixer-Upper
Many homebuyers consider homes that aren’t move-in ready, such as fixer-uppers, to save money.
Fixer-upper properties have lower purchase prices because they require significant maintenance work. These options may offer less competition and an opportunity to customize the property. You also have control over the renovations.
However, the renovations can be costly, making budgeting challenging. Estimating the costs accurately can be difficult because surprise expenses may pop up. Plus, if you don’t have somewhere else to stay during the renovations, you’ll have to live in the house during construction.
Talk to a Real Estate Consultant or Agent
A real estate consultant can provide comprehensive guidance throughout the home-buying journey. They don’t just help you buy a property; they also offer in-depth investment advice, market analysis, and long-term planning.
On the other hand, a real estate agent helps ensure a smooth transaction. They will work on your behalf to finalize offers, secure the best deals, and complete the contract.
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Get Your Dream Home Without Breaking the Bank
These strategies can make the home-buying process more affordable and flexible. However, buying your dream home requires careful planning and the right timing. Choosing a strategy that works with your income and lifestyle is crucial to ensure a decision that doesn’t break the bank.
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