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It might not be a great year to become a homeowner, but many of us are dreaming about it. Learn what you can do to turn the dream into reality. [[{“value”:”
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If you’ve spent the last few years itching to get on the property ladder, you might be feeling pretty discouraged by persistently higher mortgage rates and a stubbornly low number of houses for sale. But don’t lose hope — here are a few ways to make it more likely that you’ll be able to buy a home this year.
1. Assess your financial and personal situation
You might want to become a homeowner, but be honest with yourself — are you actually ready, or are you just assuming that buying a house is “the next step,” and not doing so means you’re not a “real adult”? If so, no shame — I was once in your shoes, and buying a house in my 20s was easily one of the biggest financial mistakes I’ve ever made.
If you are ready for all the responsibilities and expenses that come with owning, it’s best to look at your financial situation to make sure it’ll stand up under scrutiny (and higher bills). How’s your credit score? A score of 620 is generally considered to be the minimum to buy with a conventional loan, but you may be able to get a different type of loan with a lower credit score.
What about your debt? If you’ve got a lot of it, particularly of the high-interest variety, it’s a better idea to focus on paying off your debt before taking on the huge expense of a mortgage. And with a lot of debt, a lender might be reluctant to approve your mortgage application — or offer you the best rate available. And don’t forget to consider your income — it’s best to keep your predictable housing costs below 30% of your take-home pay, lest you end up house poor.
2. Save money
Think you know how expensive buying and owning a house is? You’re likely underestimating, unless you’ve been a homeowner before. Expensive repairs and other problems that you got to outsource to a landlord as a renter will become your problems — and it’ll be your checking account that covers them. As such, if you want to buy this year, saving money should be a major focus.
You’ll cover a down payment and closing costs in the process of buying, and there might be other costs before you even move in, like renovations. And then there’s the cost of the move itself. And once you’re all moved in, you’ll want a stocked emergency fund to help you cope with those surprise bills, like a furnace that dies on the coldest day of winter.
3. Choose the right mortgage type
How much do you know about mortgages? Now is the time to learn. There are many different types to choose from — a conventional loan is only the beginning. If you’re a first-time home buyer, you might want to use an FHA loan. Current or former military members are eligible for VA loans. And that’s still only the tip of the iceberg.
The point I’m trying to make here is that some loan types might be a better fit for you than others. So do some investigating into mortgage types and find the right one for you to make buying in 2024 easier.
4. Find the best lender — and the best rate
All right, you’ve assessed your finances, saved money, and decided what kind of loan you want to pursue. Now it’s time to find a good mortgage lender. Different lenders target different kinds of buyers, but our list of the best mortgage lenders is a good place to start looking. I recommend considering local lenders, too, as they often have their finger firmly on the pulse of your city and have a vested interest in getting good people into good homes.
Once you’ve identified a few potential lenders for you, apply for pre-approvals to see what rate you’d be offered. Mortgage rates can vary widely among different lenders, so it’s worth taking this step. As of this writing, the average rate on a 30-year fixed loan is 6.6% (per Freddie Mac), and if your credit score isn’t the strongest, you could end up with a much higher rate. The higher your mortgage rate, the more expensive it will be to buy a house. So shop around.
While 2024 may not be the best time to buy a house, plenty of us are hoping to become homeowners this year. If you are, too, lean on these tips to take buying from a dream to reality.
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