Anyone who’s been paying attention will have noticed that buying a home has become much less affordable in recent years. A rather grim report by Harvard University found that almost 40 million Americans live in housing that they can’t afford. What this means is they are spending more than 30% of their income on the place they own or rent. The problem is that home prices have gone up while wages have not kept pace. Now millions of Americans feel hampered from becoming homeowners not just by student debt and bad credit but also reduced buying power. So how can this be overcome?
The facts may look grim, but there are ways to turn things in your favor and find more affordable housing in NYC. Some of these have nothing to do with your income. Below are several strategies that can help reduce the cost of buying a home and make homeownership for you a reality.
Table of Contents
Boost your credit score
Let’s get the most obvious step out of the way first. How much financing you can secure for a home purchase will dictate your options. The key to obtaining that financing along with generous interest rates is a strong credit score. The very best rates and borrowing amounts are provided for those with a credit score of 700 plus. If your credit could be a lot better, then make a plan to raise it. Pay all your bills on time, build your credit history and avoid opening new lines of credit when possible. It bears mention that how much you can borrow and whether you’ll even be approved for a mortgage isn’t just determined by your credit score. But it still plays a big part and is one you to a degree have control over.
Shop around for the best rates
It’s worthwhile getting pre-qualified for a mortgage before you even make an offer on a property. It makes you a more serious buyer in the eyes of the seller. You’ll still have to get pre-approval before receiving the green light. But it gives you a rough approximation of how much you can expect to borrow and at what rate. Shop around for the best rates and don’t settle for the first lender that approves you. A simple tactic can be to counter one lender’s offer with another’s to get the rate you want. Also look into different loans types and discuss them carefully with a financial planner to find the one that suits you best.
Make some trade-offs for location
Everybody wants a neighborhood that has great amenities and location, but affordability puts a limit on your options. You may already have a neighborhood you’re interested in but be willing to look around and reduce your expectations. The most desirable areas have the best amenities and transportation. As a result, the prices are much higher. What this all comes down to is researching the housing market. Prices change all the time so stay informed about the median selling price in your preferred and less preferred neighborhoods. When deciding where to live, consider those qualities that are most important to you. If you’re willing to sacrifice on transit time, then you’ll find more affordable options.
Go DIY on repairs and projects
Whether you’re a renter or owner, you’ll still have to deal with occasional maintenance to maintain a living space. Buying a property “as-is” has the advantage of being less costly but presents some risks as it’s hard to estimate how much any renovations or repairs will cost once the deal is done. Some repairs are very expensive and require professional help such as roofing or doing an entire kitchen renovation. But with a bit of searching and patience, you can find reasonably priced properties that only require small repairs done over time. If you can spread out the cost of repairs and do what you can on your own, you’ll immediately increase your buying options. Any improvements will also build equity on your home which will make a difference when it comes time to resell later down the road.
Even in a buyer’s market you still have to be careful that you don’t overpay. One clear sign that a property may be overpriced is if it’s been on the market longer than average. Have your buyer’s agent pull statistics on the property. How long has it been listed? Is that longer than average for homes in that neighborhood and in that price range? You’ll want to do a home inspection to learn more about its market value and any issues you might run into after the closing. The best way to ensure you don’t overpay is to run a Comparative Market Analysis (CMA). This will take into account real-time factors that influence the property’s value to help you find the ideal offer price.