Home prices in some areas of the country are seeing all-time highs with equity growth. However, getting into a home and being able to afford your new home payments can be difficult if you don't look for the right preparation and the right home. Here are some recommendations to help you find a home to buy that you can afford in today's market.
Evaluate Your Debt-to-Income Ratio
One of the first things in your search for an affordable home is to look at your debt-to-income ratio and see where you can improve it. Look at how many credit cards you have and how much debt you are carrying that is unnecessary. Work at paying down unsecured debt as much as possible. The more you can pay off your credit debt, the better your credit score will be, and this will help you get a better mortgage. The higher your credit score is when you apply for a mortgage, the more affordable and low fixed rate mortgage you can qualify for. And this will help you afford your home a bit better.
Then, if you have any expensive vehicle loans you are paying on, look at how you can reduce your debt by trading in your expensive vehicle for a more affordable option, especially if you have a vehicle that uses a great amount of gasoline. There are vehicle options that are more energy efficient and can cut your fuel bill nearly in half with an economic car.
Look For Financing
When you have paid down debt and improved your credit situation, you can seek out a mortgage loan and find out the types of programs available. There will be fixed mortgages with a low market rate, or you can look at an adjustable rate to take advantage of a lower rate initially. Talk to a mortgage lender about getting prequalified so you know how much lending power you have to put toward your home purchase. This is a smart start for you to set a home purchase search budget.
However, keep in mind that you can still put a down payment toward your home's purchase to help you afford even more of a home. For example, if you are prequalified for a mortgage of $360,000, if you have a down payment saved totaling $20,000, you essentially increased your home budget to $380,000. The more you save on a down payment, the more you can spend on your home.
Contact a home buying agent to learn more.