What If You Can’t Afford to Buy a Home in Your Area?

Home prices have been steadily increasing, especially throughout the pandemic. In several markets, prices were already high to begin with, leaving many buyers wondering if they’ll ever be able to afford a home in their desired location.

On top of rising home prices, in most major US cities rent prices have spiked and availability has dropped. With all this in mind, it’s easy to understand why you might feel discouraged entering the housing market right now.

Not all is lost, though. Regardless of market conditions, which are always bound to fluctuate, there are steps you can take to set yourself up for success. We’re here to help you develop a winning strategy that will work for your situation and help you overcome the challenges of a high-priced home market.

Save For Your Down Payment

Regardless of market conditions, it’s always a good idea to have funds saved up for your home purchase. For most loan programs, you’ll need to put some amount down, even if you’re using a first-time homebuyer program that only requires a small percentage for the down payment. If you’re able to finance with a USDA or VA loan, where you don’t need to put any money down, having a healthy amount of savings banked for your home needs will put you ahead of the curve for homeownership budgeting, including maintenance and upkeep.

By planning for your homeownership goals early on, you can build up a sizable savings fund, which can be a big help in high-priced markets like we’re currently experiencing. And, if prices begin to drop, then your savings can go even further, making it a win-win.

Consider Properties That Can Generate Rental Income

As you tour homes and narrow down your search, don’t overlook properties that come with built-in income. A duplex, or even a larger single-family home that allows you to rent out the basement or other rooms, could end up being the make-it-or-break-it option that helps you achieve your goal of buying a home.

Lenders will typically take into account potential rental income when calculating how much they can approve your loan for. Depending on the type of loan you’re applying for, there will be different guidelines for how that amount is calculated and any documentation you will be expected to provide.

Of course, you’ll want to consider the tax implications of rental income and have a financial plan for unexpected vacancies, should you be faced with those situations. But, given the high demand for rentals, buying a house with rental potential is a viable option to help combat the rising cost of housing in most markets across the country.

Coordinate A Joint-Purchase with Family or Close Friends

Chances are high that you’re not the only person among your family or close friends looking to buy a home for the first time. One option to consider is pooling resources on a joint purchase. While it may not be the home purchase you initially envisioned, it can be a great interim solution.

If you’re considering this option, you should:

• Choose family members or close friends who complement your home lifestyle.
• Be clear about your expectations from the living arrangement and understand their expectations, too.
• Work out a set of ground rules that will govern the household.
• Establish clear expectations about the financials before getting started.

You might be hesitant about purchasing a home alongside someone who has a close personal relationship with you because you don’t want this to drive a wedge in that connection. By working through the process outlined above, you can determine if this is an appropriate option for your situation.

Focus on Properties in Your Budget

Once you’ve established a budget of what you can afford and determined how much you can qualify to finance, focus on searching for properties in that price range. If you were initially aiming to purchase a single-family home, this might mean adjusting your buying strategy to include townhouses and condos.

Being open to adjusting your expectations can make the difference in achieving your dream of holding those keys to your new home.

Utilize State Bond Loan Programs and Grants

Many state housing authorities offer special loan programs targeted at solving the problems homebuyers may face, from mortgage affordability to saving enough for a down payment. Thanks to down payment grants, closing cost assistance, and mortgage tax credits, which are the cornerstones of many of these special loan programs, these mortgage options can become the missing link that helps you bridge the gap.

They can help you overcome the obstacles you’ve been facing in your buying process and ultimately help get you into a home in a market where you didn’t think it was possible. And best of all, many of them are available to both first-time and move-up buyers.

From saving for your down payment, to considering properties with rental income, to shifting to buying with a close friend or relative, we have covered several ways you can overcome the challenge of rising home prices in your area. Special state loan programs and shifting your mindset on the type of property you’re searching for can also help you achieve homeownership while still meeting the expectations you have for your new home.

We hope these tips help you feel more confident about tackling the challenge of housing affordability in your market. Our team is also here to help you along the way, providing guidance and support to help you find the best solutions for your unique goals and financial situation.