If you’re one of the millions hoping to own a home in the future, you’ve likely spent time online browsing homes and their prices, wondering how people are managing to afford them in today’s market. With rising home prices and interest rates, it’s understandable to feel overwhelmed. However, there is a way forward. With some preparation and planning, you can work toward your dream home.
Here are some strategies to help you navigate the path to homeownership:
| Step | Strategy | Pro Tip |
|---|---|---|
| 1 | Use an Affordability Calculator | Adjust variables in Zillow’s calculator to fine-tune your budget. |
| 2 | Get an Up-to-Date Estimate | Use BuyAbility for real-time affordability estimates. |
| 3 | Understand Debt Impact | Use a DTI calculator to gauge how debt affects your mortgage eligibility. |
| 4 | Use a Mortgage Calculator | Simulate different down payments and interest rates to see monthly payment changes. |
| 5 | Get Pre-Qualified | Share your pre-qualification with your agent to focus on affordable homes. |
| 6 | Consult a Loan Officer | Shop around for the best mortgage rates and terms. |
| 7 | Improve Your Credit Score | Boost your credit score for a lower mortgage rate. |
| 8 | Use Rent vs. Buy Calculator | Determine when buying becomes cheaper than renting. |
| 9 | Work with an Agent | Find an experienced agent to help navigate the market. |
| 10 | Use a House Hunting Checklist | Keep track of your must-haves and priorities. |
| 11 | Explore Other Markets | Search in more affordable housing markets. |
| 12 | Consider a Fixer-Upper | Save money by purchasing a home in need of repairs. |
| 13 | Try House Hacking | Rent out part of your home or buy a multi-family property. |
| 14 | Save Creatively for a Down Payment | Use gifts or cut back on expenses to fund your down payment. |
| 15 | Research Low Down Payment Options | Investigate first-time homebuyer programs and low down payment loans. |
| 16 | Calculate Monthly Home Costs | Use Zillow’s cost calculator to see monthly expenses for specific homes. |
| 17 | Lower Buying Costs | Factor in hidden fees and taxes, and ask for closing cost concessions. |
1. Use an Affordability Calculator
Starting with an affordability calculator can help you understand how much home you can afford. It takes into account your income, debt, and down payment savings. By doing so, you can find a price range that fits your budget and estimate monthly payments.
2. Get an Up-to-Date Estimate of Your Budget
Different types of budget calculator gives you a precise, real-time estimate of your affordability. These considers your credit score, mortgage rates, and other financial details to provide a more accurate view of what you can afford right now.
3. Understand How Debt Affects Your Mortgage
Your debt-to-income (DTI) ratio is important in determining your ability to afford a mortgage. Lenders use it to assess whether you can manage both your existing debt and a new mortgage.
4. Use a Mortgage Calculator for Overall Cost
Once you know your price range, a mortgage calculator can help you see how your down payment and interest rates will impact your monthly payments.
Mortgage Calculator
5. Get Pre-Qualified
Pre-qualification provides an estimate of how much you can afford based on your reported income, assets, and credit score. You can share this estimate with your agent to focus on homes within your budget.
6. Consult a Loan Officer for Mortgage Options
Loan officers can guide you through various mortgage options that match your financial situation. They can also offer advice on whether you can purchase a home while managing other debts, like student loans.
7. Work on Improving Your Credit Score
Your credit score significantly impacts the mortgage rate you’re offered. Improving your score can help you secure a lower rate, which will lower your monthly payments.
8. Use the Rent vs. Buy Calculator
The Rent vs. Buy Calculator helps you understand whether buying a home makes financial sense based on how long you plan to stay. If you plan to move soon, renting might be cheaper.
Rent vs. Buy Calculator
9. Work with an Experienced Agent
A good agent is invaluable. They understand the local market, help you find suitable homes, and craft competitive offers based on market conditions.
10. Use a House Hunting Checklist
A checklist helps clarify your needs and wants in a home. It can also prevent you from being distracted by homes that don’t match your criteria.
11. Explore Other Housing Markets
Home prices vary greatly depending on location. If you’re in a high-cost area but have flexibility, consider searching in markets where homes are more affordable.
12. Consider a Fixer-Upper
Buying a home that needs repairs can save money upfront, provided you have the time and resources for renovations. Over time, you can improve the home to suit your needs.
13. Explore House Hacking
House hacking involves renting out part of your home to generate income, which helps cover mortgage payments. You could also buy a multi-family property to live in one unit and rent out the others.
14. Save for a Down Payment in Creative Ways
More buyers are using gifts or loans from family and friends to fund their down payment. Some even add down payment funds to wedding registries. You might also consider cutting back on other expenses.
15. Look into Low Down Payment or First-Time Homebuyer Programs
Some programs offer down payment assistance, especially for first-time buyers. While putting less than 20% down typically requires private mortgage insurance (PMI), these programs can make buying more accessible.
16. Calculate Monthly Costs for Specific Homes
Zillow listings include a monthly cost calculator that factors in utilities, taxes, HOA fees, and mortgage insurance. This helps you understand what you’ll actually be paying each month.
17. Look for Ways to Lower Overall Buying Costs
Certain homes may have hidden costs, such as high property taxes or homeowner association fees. Consider these additional expenses when searching for a home.