Owning a home is a dream of many people, but it can be an expensive one. Though home prices do go through downturns, they have generally risen over the years, and in some places, they are out of reach from all except the wealthy. The good news is there are some things you can do to boost your chances of being able to afford a home. Here are five of them.
Boost Your Credit Score
When you are thinking about ways to afford a home, your credit score might not be the first thing that comes to mind — but it is a very important factor. And unless you are planning to pay cash for a home — something very few people are able to do — you are going to need to get a mortgage. And what kind of interest rate you get on your mortgage is largely dependent on what your credit score is. The better your credit score, the lower interest rate you will get, which can save you tens of thousands of dollars over the life of your loan, which can make a home much more affordable.
Get a Second Job
How much house you can afford is largely based on your income. The higher your income, the bigger mortgage you can qualify for. One way to increase your income is to get a second job. There are a number of options to choose from. You might get a traditional job, such as a part-time role at a retail store or you might try a side hustle such as driving for a ride-sharing service. You also could find a contract role related to skills you have, such as designing websites, doing freelance writing or working as a sports official.
Borrow from an Investment
Another way to improve your chances of affording a home is to borrow money from an investment or an insurance policy. If you are a first-time home buyer, you may be able to take a limited amount of money out of a 401(k) plan or individual retirement account without penalty to use for a down payment. If your 401(k) plan allows loans, you can borrow money whether you are a first-time buyer or not. If you have a whole life insurance policy, you likely have a cash value that you can borrow against to help with your down payment.
If you’re like most people, you probably live on a budget, with money devoted to necessities and non-necessities. To increase your chances of affording a home, you may need to try to cut out some of your non-discretionary spending. Some ways you could do this are to find better rates on things like cell phone and internet plans, bundle insurance policies to get discounts and consolidate debt to lower interest rates and your monthly payments. Cutting expenses will free up more money in your budget to devote to a monthly mortgage payment and other home expenses.
Lower Your Expectations
The best way to afford a house may be to buy less house. Many people go into the home-buying process with certain expectations, and stretch their budget to the breaking point to meet those expectations. It can be a better decision to settle for a less expensive house and then make renovations later on. Or, you can live in a house for a few years, build equity, then sell it and move to your dream home.
Buying a house is likely to be the biggest financial commitment you ever make. Following these and other tips to help you afford your home can make it a little less of a stress on your pocketbook.