Friday, Sep 20, 2024

Nearly 40% of Home Buyers Rely on This to Afford a House

If you’re in the market for a home right now, it’ll come as no surprise that it’s pretty rough out there. Home prices are up 27.7% over the past three years, pushing the median home price transaction to a staggering $431,000.

Mortgage interest rates have added to the pain for potential home buyers, as rates soared over the past few years as the Federal Reserve raised interest rate hikes to cool inflation. This has been exacerbated by a low inventory of homes.

The result? Home affordability is at a 40-year low. This is leading many new home buyers to lean on family and friends to help them buy their homes. According to Zillow, nearly 40% of buyers receive a financial gift to put toward a home purchase — up from just one-third before the pandemic.

Home buyers may need help for a while

The latest data shows home prices rose 3.9% between September 2022 and September 2023. Home prices have remained stubbornly high, partly because many homeowners don’t want to sell their homes and take on a much higher rate to buy a new one.

And there isn’t any consensus on what will happen with home prices in 2024. Some experts expect prices to rise, while others anticipate a price decrease.

There has been a glimmer of hope on the interest rate front, as rates have retreated slightly as the Federal Reserve has paused its federal funds rate hikes. Some industry experts, including the Mortgage Bankers Association, think mortgage rates will fall to 5.5% by the end of next year.

How to make a home as affordable as possible

Whether or not you receive money from family to help you with a down payment, you can do a few things to prepare yourself to buy a home:

  • Pay down your debt: Eliminating (or at least reducing) your credit card debt or other loan balances will help improve your credit score and make it easier to afford your mortgage payments. Lenders like to see you use less than 36% of your available credit, so aim for at least that goal.
  • Consider an FHA loan: Coming up with a 20% down payment is more difficult than ever, which makes a Federal Housing Administration (FHA) loan even more attractive. If you have a credit score of 580 or above, you’ll only need a down payment of 3.5%.
  • Shop around for the best lender: Just as you’ll shop around for the best house, considering multiple mortgage lenders will help you find the best one. There’s no guarantee you’ll get a better interest rate or lower your costs for mortgage points by shopping around, but it’s to get better loan terms by comparing lenders.

Taking small steps toward saving money and getting your finances ready for a home purchase will help you slowly move closer to your goal. Remember that while waiting to buy a home may not be fun, it’s likely better than rushing into the process. A stunning 78% of homeowners who bought in 2022 regret their purchase.

The above suggestions can help you achieve your goal of buying a home. But if you still need some extra help — and a financial gift from the family isn’t in the cards — you may want to consider moving to a cheaper city.

This article was written by Chris Neiger from The Motley Fool and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to [email protected].

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By: newscred_admin
Title: Nearly 40% of Home Buyers Rely on This to Afford a House
Sourced From: www.pncrealestatenewsfeed.com/nearly-40-of-home-buyers-rely-on-this-to-afford-a-house/
Published Date: Fri, 22 Dec 2023 12:00:03 +0000

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