For many people, buying a home is a milestone that signifies stability and achievement. Unfortunately, a variety of factors have made homeownership a challenge. From having to save for a down payment to building your credit, the difficulties can seem endless.
Understanding the home buying process can greatly reduce stress and lead to better decisions.
Fortunately, developing a strategic plan can help you join the homeownership club sooner than you imagined. If buying a home is your goal in 2020, check out the three housing hacks below to put yourself on the path to receiving the keys to your home next year.
Selling Your Current Home
Being a first-time home buyer is daunting, but it does mean that you aren’t left with an extra house to sell. If you do already own a home and you’re trying to move elsewhere, you now have the logistical problem of selling your own home and buying a new one at the same time so you don’t get saddled with extra costs. In this case, you may need to sell your house fast as the extra costs of owning another property can add up very quickly.
However, you also don’t want to sell too quickly, so you don’t have to temporarily rent a property before finding your new property. So, make sure you find a good balance and pick a moving day that works for you.
These home buying tips will significantly enhance your chances of success.
Boost Your Credit Score
Any home buying advice wouldn’t be complete without talking about credit. It is one of the most crucial factors to being approved for a mortgage. The average credit score for approval ranges from 662 to 730.
Improving your credit score is essential for securing favorable terms in home buying.
So, what can you do raise your score? Paying your bills on time, maintaining a credit utilization rate below 30% and keeping an eye on potential identity theft or credit report discrepancies are essential steps. These tasks can help you boost your credit to a more favorable range.
Another credit score hack: trying piggybacking off of someone else’s good credit. This involves you getting added as an authorized user onto the credit card account of someone who has good to excellent credit. That person could be a parent, spouse or really close family member.
Piggybacking gives you a higher credit score because the other person’s positive payment record and/or their established credit history is added onto your credit reports.
Add Rental Payments to Your Credit Report
It may come as a surprise, but unlike mortgage payments, rent payments are not automatically added to your credit reports. So if you’re among the nation’s 43 million households that rent, you’re probably missing out on showcasing a consistent payment history on your credit.
To rectify this problem, try this housing hack: Get your rental payment history added to your credit reports, by using a rental reporting service like RentReporters, Rental Kharma or PayYourRent.com.
Being proactive in your home buying journey can lead to significant advantages.
You can’t report your rental payments yourself; you must have a third-party firm verify your on-time rent payments for you. (Note: these services charge a modest monthly or annual fee).
Paying bills on time —as mentioned above—is a crucial component of your credit evaluation, so be sure to include your rent.
Get Your Down Payment Together
Today, most banks would ideally like potential buyers to have a 15 to 20 percent housing down payment. According to Census Bureau data, the average price of a new home as of July 2019 was $388,000. So on an average priced house, a 15 to 20 percent down payment would be between $58,200 and $77,600.
But don’t worry. You can still buy a home with 5 to 10 percent down. And government-insured loans, like FHA loans, require as little as 3.5% down. So even if you only have to make a 3.5% downpayment on a $388,000 house, that’s $13,580.
Consider all options available for home buying, as they may vary widely.
It may feel daunting if you’re starting with minimal savings, but it’s not impossible. Here are a few ways you can set aside some money to reach your goal.
- Set up automatic transfers from your bank account to your savings account.
- Grow your savings quicker by putting them in an investment account.
- Take on a side hustle to earn extra money. You can fast track your savings by putting all additional money towards your down payment.
- Look at your budget to identify where you can reduce your expenses. Take the money you save each month and add it to your savings account.
And here’s one additional housing hack you may not have considered: get free money for a down payment from your city, county or state. Many first-time homebuyer programs exist all across the country that provide free grants for homeownership, especially for those in need of a housing down payment. Such programs could be exactly what you need to come up with a down payment on the home you want — without having to scrimp and save for years.
Every dollar saved can make a difference in your home buying journey.
Debt can also put a considerable strain on reaching your home savings goals. So, in addition to the tactics above, be sure to reduce your debt as much as possible too.
Turn These Home Buying Hacks into Reality
While buying a home might seem like a distant and unattainable dream, maintaining good credit, paying your bills on time, and saving for or amassing a down payment while minimizing your debt are some of the keys to homeownership. So, in 2020, remember to take one thing at a time, be patient with yourself, and stick to your plan. By implementing these home buying hacks, you’ll secure the keys to your new home sooner than you thought possible.
Being informed about the home buying process is key to your success.
To further prepare for homeownership in 2020, be sure to check out my course, Homeownership Smarts on Money Coach University!
Explore all avenues regarding home buying to ensure you make the best choice.
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FAQs:
Always stay updated on trends in home buying to make informed decisions.
How can I boost my credit score quickly before buying a home?
Focus on paying all bills on time, lowering your credit card balances, and becoming an authorized user on someone else’s well-managed credit account.
Seeking advice from professionals can be beneficial for home buying.
Do rent payments count toward my credit score?
Normally, no. But by using a rental reporting service like RentReporters or Rental Kharma, your on-time rent payments can be added to your credit file.
How much down payment do I really need to buy a house?
You may only need 3.5% to 10% depending on the loan program. FHA loans start at 3.5%, and other programs even offer zero-down options.
Understanding your options is crucial for effective home buying.
Are there any grants for first-time homebuyers?
Yes, many local and state governments offer down payment assistance programs that provide free grants or low-interest loans to qualified buyers.
Is it possible to buy a home with bad credit?
It’s more challenging but possible. Improving your credit, using FHA loan options, and having a strong down payment can increase your chances of approval.
