Two Steps to Make Your Home Purchase More Affordable
Last Updated on May 5, 2022 by Luke Feldbrugge
Mortgage rates and home prices are two factors that will dictate where and how much home you buy. While these factors are determined by events that are out of your control, there are other factors that you can control that could help get you in the best possible shape to buy a home. Let’s look at two steps to make your home purchase more affordable
Three Factors Causing Hot Housing Market
Three significant factors can explain the hot housing market we are in.
- We are coming out of a cycle where mortgage rates were low
- A wave of first-time home buyers spurred by a pandemic-induced desire for space has created considerable demand for housing
- The housing supply is low relative to demand
Freddie Mac estimates that the US is 3.5 million homes short of the demand from would-be homebuyers. The supply chain disruption has only added to the delay in meeting this demand.
Against the backdrop of a shortage of homes, economists predict that home prices will remain high with slight cooling months from now. To buy a home, buyers will have to rise to the challenge of the added costs that higher rates will create in a continued competitive market.
It’s not all doom and gloom, though. There are indications that the market could be cooling. That doesn’t mean that prices will drop, but it could do away with bidding wars that have driven some housing markets to insane scenarios.
Steps to Make Your Home Purchase More Affordable
If you are looking to buy a house, there are two steps you can take to make your home purchase more affordable.
Credit Scores Matter
One step you can take to make your home purchase more affordable is to focus on improving your credit score. A high credit score directly impacts your mortgage rate and helps you qualify for the best mortgage rates available. A difference of just 100 points could save you a significant amount of money.
Conventional loans require a much higher credit score than government loan products which do not require higher credit scores to qualify. You could qualify for an FHA loan, with a credit score as low as 500. VA loans don’t require a minimum FICO score, although lenders issuing VA loans usually want a score of 620 or more.
Some ways to quickly improve your credit score:
- Check your credit report for errors. If you spot any, you’ll want to dispute them.
- Reduce your credit card utilization ratio. Credit utilization is the percentage of credit you’re using compared to your total available credit limits across all of your revolving credit lines. One step you can take to pay off existing revolving debt is swapping it with a personal loan with a fixed monthly payment.
- Another approach is to ask your credit card company for a credit limit increase. If you qualify, this would instantly lower your debt to credit ratio.
Here are some steps to improve your credit score recommended by credit card experts.
Save for a Bigger Deposit
Another step you can take to make your home purchase more affordable is to save for a bigger deposit. Saving for a bigger deposit could ease the amount of money you are spending every month on your mortgage. It could also shorten the term of your loan because you’re borrowing less from your lender. And it’s likely to land you a lower interest rate.
But saving for a big deposit is easier said than done, especially in the current economic environment. If you are saving for a deposit, you could look to put short-term savings in a high yield savings account. Separating these funds is a great way to avoid accidental spending, and the high yield will help maximize your earning power.
Consider all your options. Some buyers may qualify for home buying assistance programs.
You could also bank on savings on the back end of the mortgage process. Some programs can help with closing costs, which help maximize your overall spending power. Home for Heroes real estate and mortgage specialist can help you save an average of $2,400 when you purchase a new home.
Homes for Heroes Saves Heroes Money When They Buy, Sell or Refinance
If you’re a firefighter, EMS, law enforcement, active, veteran or reserve military member, healthcare professional or teacher and you’re ready to buy and/or sell a home, we would be honored to work with you to get it done and save you money in the process. Let our real estate and mortgage specialists in your area work with you to find the home you want. If you close on a home with your local Homes for Heroes specialists you can save an average of $2,400. Simply sign up today to learn more about how our specialists can assist and save you some money.
