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Buying your dream home may seem like just that—a dream—when you look at your bank account, but affording your own house isn’t an impossible task. With a few smart moves, like prioritizing your wish list, reconsidering your down payment, and following the market, you could end up in the space you’ve always wanted.
Related: Homeowners Insurance: What to Know Before You Buy
Start preparing your finances.
Whether you’re setting aside money every month for a down payment or trying to work a purchase into your current budget, saving every little bit helps. “It’s never too early to start saving,” says Leslie MacKinnon, a licensed real estate professional with Compass in Boston. “My 12-year-old started saving for her first property at age 10.” Work with your realtor to determine how much liquid cash you’ll need and any expenses beyond the price of the home—like closing costs or professional mortgage insurance (PMI)—that might add up. “A down payment of 20 percent or more is always preferable, especially to avoid PMI and to be attractive in a competitive bidding environment,” says MacKinnon. “But it’s not always necessary—many first-time home buyers are successful when equipped with five percent to 15 percent down.”
Many cities and states also offer incentive programs that trim costs or provide tax credits for first-time homebuyers. And though you might be tempted to start investing in big-ticket items for your future home while you’re looking at properties, MacKinnon warns against any major shopping trips: “Big purchases can cause dings on your credit report and delays in your mortgage application process,” she says.
Make a wish list.
Most home buyers go into their search with an idea of what their dream home would (and wouldn’t) include—you might be looking for a house with a newer roof and boiler, without a septic tank or well water, or have your heart set on a walk-in closet, a finished basement, or a specific neighborhood. But if your budget doesn’t allow you to check every box, decide which features are truly essential and which you can put off to save money now. “Be flexible on your wish list and think about perhaps trading up in a few years,” say MacKinnon. “Look in more affordable regions than you originally considered, and prioritize needs over wants.”
For some buyers, a fixer upper in a dream location might seem like a win-win, but unless you have plenty of cash to fund your renovation—or you’re willing to do it slowly over a long period of time—a house that needs a major gut isn’t necessarily cheaper. “Some buyers launch into the process thinking a fixer upper is the way they want to go, but after adding up the amount of money needed to turn the home into their vision, they realize that a newer, more move-in ready home makes more sense,” says MacKinnon. “That said, if the buyer is looking in a particular highly coveted neighborhood with low inventory, they may consider a fixer upper just for the location.”
Pay attention to the market.
Tracking the real estate market can help you identify the most lucrative time to make an offer, and that becomes much easier if you’re working with a professional. “Before you’re ready to buy, start interviewing agents in the market you’re considering,” says MacKinnon. “Look for an agent with experience and expertise in that market—and ask for testimonials and a description of their services as a buyer’s agent.” In addition to helping you find a mortgage lender for your pre-approval—which gives you an idea of how much you’ll be able to spend on your home—an agent can keep track of supply and demand in your area. “Follow market trends, watch interest rates, read the local and national real estate news, and keep in touch with your trusted agent,” says MacKinnon. “Watch the market carefully to keep aware of inventory and trends of how quickly property is moving.”