It is not true that the American dream of owning your own home is an obsolete notion. If you are paying rent, you are probably paying more per month than the cost of owning a home. You are also receiving none of the tax breaks or investment returns that come with homeownership. There are steps you can take to put you and your family into your own home. It is not easy, and it will take time, but the result is well worth it.
Budgeting for a new home
You need to figure out how much home you can afford. Assuming an annual income of $50,000, the following are examples of affordability. One is determined by good credit, timing, down payment amount, and the other is based on good credit with some money available for a down payment.
Home affordability by timing your purchase when interest rates are very low.
Your interest rate depends on your credit score and the amount of down payment, among other factors. The $1,300 monthly payment amount is a little under 30% of your gross monthly income of $4,167, leaving you $2,867 for all other monthly expenses – remember this figure is based on gross monthly income, not net, which could leave you with considerably less for other fixed expenses.
Home affordability by down payment
Your down payment amount significantly influences the amount you can afford. Most low–down–payment mortgage loans require at least 3% down. However, the more you pay upfront, the more you will be allowed to borrow. Of course, this too depends on a good credit score as well as the amount of savings you have. With annual earnings of $50,000, it is very difficult to save any substantial amount, but as stated earlier, buying a home with little income requires sacrifices.
Chances are good that you are paying at least $1300 per month for rent and have nothing to show for it. Time to draw up a budget and see which expenses you cannot cut and which ones you can scrimp on or do without.
Location, location, location
This trite but true real estate mantra is usually uttered with regard to purchasing a home as an investment. In your case, it has to do with where the most affordable homes are, which states and which counties within those states. If you are one of the fortunate people who work remotely, you have much more flexibility in choosing an area than the daily commuter. No matter your particular working arrangement, there are ways to make homeownership a reality.
The remote worker
There are affordable homes for sale right now in the United States. You would be wise to take advantage of the situation. Remember, you are buying your first home, not your forever home. The homes in your price range are listed here, with West Virginia leading the list. There is a decent inventory of affordable homes available in many of these states. Go online and search for houses for sale in any of these states. Qualify your search with the maximum price you are willing to pay.
One step you can take is to find a neighborhood you can afford that is as close to your work location as possible. An experienced, reputable real estate agent is your best option. They know the market and the affordable neighborhoods, so you do not have to do the time-consuming, frustrating job of exploring the housing market in your targeted area.
It is possible that this will involve a long, expensive commute. USA Today conducted a survey on ways to save time and money on commuting throughout the states. The average expenditure per year was $2,600 or $10 a day and the time spent was 45 minutes a day. Those 45 minutes a day would be more like two and a half hours a day in a big city such as Los Angeles with virtually no public transportation available. Here are ten ways the average commuter can save time and money.
- Carpool – with a neighbor going to the same place or near the same place you go to work. This saves money and time (you can use the carpool lane).
- Keep your car maintained.
- Use public transportation if possible. If it is, go to publictransportation.org to check out the cost vs other forms of commuting.
- Avoid toll roads.
- Take back roads to avoid sitting in stop-and-go traffic.
- Use cruise control to save gas.
- Drive a used, fuel-efficient car.
- Go easy on the air conditioner. It uses engine power.
- Use pre-tax dollars. The IRS allows employers to offer transportation benefits to workers. You could use $255 per month in pre-tax dollars on commuting expenses such as parking or bus passes.
- Change your work hours if possible to save commute time.
The housing market in the US is not static. Interest rates, the most affordable areas in the country, and the inventory and prices of homes change frequently. You or your realtor needs to keep up with the trends to obtain the best solution for your current needs.
Do not get discouraged. Buying a home is more difficult now than perhaps it has ever been. Take your time, gather information from experts, and keep in touch with them. There is a home for you, and you will find it.
Take the time to contact a mortgage broker in your area. These professionals specialize in getting folks in houses, regardless of their income level. If there’s a house out there for you, a broker can help you find it.