So, you’ve saved up and it is finally time for you to buy a home. Then you learn that the housing market has gotten expensive and competitive. Will you still be able to afford a home in a tough market? With increased interest rates on mortgages and inflated home prices, homeownership may seem unattainable. However, with some smart advanced planning, you can achieve this dream sooner than you think.
There are a number of strategies you can capitalize on in order to be able to afford a home, and they fall into three main categories: creating more income, seeking or compromising for lower prices, and finding money you already have.
Create More Income
There are a few ways you can increase your income so you can afford a higher monthly payment on a home. Remember that you should spend max 28% of your (gross) income on your mortgage, so you want to plan for enough monthly income to comfortably cover those payments.
1. Ask for a Raise
Has it been a while since you have gotten a raise at your job? Maybe you can take on more responsibility at work. If either of these scenarios fits you, it may not be a bad idea to approach your supervisor to ask about increasing your income. Even if you aren’t in the market for a home, if you feel you are underpaid or just have not received a raise in a while, this is something you can think about doing! Those extra funds will always come in useful.
2. Take On a Side Hustle
If you can’t make more money at your job, perhaps there is some simple work you can do on the side to bring in extra income. Some examples include tutoring, giving music lessons, copy editing or freelance writing, and more. Think about your skill set, even if it’s not related to your actual profession. You want to take quality of life into consideration, too, so don’t take on extra work if it’s not something you can actually handle. But if you have the time and energy, a side hustle can be a great way to make more money.
3. Find a New Job
This last one is much easier said than done, but that doesn’t mean it isn’t the right choice for you. If you feel you have outgrown your current job or that you’re not making enough money and probably won’t get a high enough raise (if you get a raise at all), finding a new job may not be a bad idea. With a new job, you can search for a position that’s a promotion and that pays you significantly more than what you are making now. A bonus is that, if you’re not thrilled at your current job, you may actually be happier somewhere else!
Compromise for a Lower Price
Sometimes, increasing your income is not an option. That doesn’t mean you’re out of luck in your home search! You may just have to compromise in some areas in order to find a house at a lower price point. This is not a bad strategy and has really paid off for many people. Here are a few ways you can compromise.
1. Slight Change of Location
If the area where you are looking for homes is on the pricier end, you may have better luck finding that perfect house just outside the area you were originally looking. Often, surrounding towns of a popular area have just as nice homes for less. You may not have all the convenience of living wherever you had first been looking, but you may gain square footage, property size, and affordability.
2. Fixer Upper
Fixer uppers can be hidden gems. Sure, they need work and that costs more money, but that work can be done slowly over time. You’ll have gotten the location you want and you can eventually make the house your own with your own personal touches in the design–something that a move-in ready home won’t necessarily have.
Find Money You Already Have
Did you ever pull a wad of bills out of a pants pocket before throwing it into the laundry? It’s a great feeling when you find money you didn’t realize you had! You can do the same with the money already in your bank account.
1. Examine Your Spendings/Create a Budget
You may not realize that you are spending significant money in small ways over time on things like streaming accounts, a daily cup of coffee, fast food, and so on. Take a few months and really look into exactly where your money is going. Create a budget for necessary expenses like groceries and clothing. You might be surprised at where you can save a nice amount of change per month–and that really adds up.
2. Cut Out Unnecessary Bigger Expenses
In addition to smaller spendings, there may be some bigger expenses you can cut out. For example, if you are a two-car family, can you make do with only one car? Examining your expenses with a close eye and making cuts where possible can increase your funds without having to bring in any extra income.
We Can Help You Afford a Home in a Tough Market
If your dream is to own a home, the experts at DeSantis, Kiefer, Shall, & Sarcone can help make that dream a reality. With the above strategies and some financial know-how, we can work with you to plan for those big financial goals like home ownership, so that you can afford a home in a tough market.