According to a recent Harris Poll survey, 8 in 10 Americans say buying a home is a priority. And, 28 million Americans plan to buy within the next 12 months. Homeownership provides many financial and nonfinancial benefits so that interest is understandable.
However, it’s unlikely all 28 million Americans will accomplish that goal in the coming year. Experts project a total of around 5 million homes will be sold in 2023. Why is there such a big difference? It’s partly because there can be challenges to buying a home.
In the same survey, when asked, “Which of the following are preventing you from pursuing homeownership at this time?
- 34% answered, “I don’t have enough saved for a down payment”
- 30% answered, “My credit score”
If you’re aiming to buy a home, here’s what you need to know to accomplish that goal.
Save for Your Down Payment
Your down payment is a big chunk of what you pay up front for your home. For most home purchases, buyers put down some amount of cash up front (a down payment) and then take out a loan (a mortgage) to pay for the rest.
It’s a longstanding myth that you need to pay 20% of the purchase price for your down payment. In reality, 20% down isn’t always required. In fact, according to the National Association fo Realtors, today’s median down payment is 14% for the average buyer and just 6% for a first-time buyer.
Regardless of how much money you can save for your down payment, know there’s help available. A local lender can show you options to help you get closer to your down payment goal. Plus, there are loan types, like FHA loans with down payments as low as 3.5% for some buyers, as well as VA loans and USDA loans with no down payment requirements for qualified applicants.
Here are a few tips to help you save for your down payment:
- Remember to factor in closing costs.
- Maintain your savings.
- Explore your options and lean on your trusted advisor for expert guidance.
Improve Your Credit Score
Your credit score is a number that indicates how financially reliable you are to lenders. A higher credit score usually means you will be able to borrow more money at a better interest rate. If your credit score is preventing you from getting an affordable mortgage, there are steps you can take to improve it. Here are two:
- Pay your bills on time. Your credit score will improve.
- Mix it up. Having a mix of loans, credit cards improves your credit score.
Bottom Line
If you want to purchase a home this year, let’s get together so we can start preparing.