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In many places across the country, Americans can’t afford to buy a home – in fact, one report found that out of 473 counties, over 70 percent were priced more than average wage earners could afford.
If you want to buy a home in your own hometown as it’s in one of many areas with a high cost of living, it can be very difficult to do. Those who are currently renting are probably paying a significant portion of their income toward rent every month, making it nearly impossible to save for a down payment. Yet buying a home is usually the best idea financially as you’ll be building equity instead of helping someone else build it.
So how can you swing purchasing a home in a pricey area? Following these tips might help you make it happen.
Start By Knowing How Much House You Can Afford
Before taking steps to actually buy a house, you’ll need to know how much home you can afford, something that can be determined using a house payment calculator. Once you understand more about your financial situation, you’ll be able to move forward better equipped to achieve your goals.
Save as Much as You Can, No Matter What it Takes
If you’re spending a good chunk of your income on rent and other bills, saving is going to be difficult, but if you really want to buy that expensive house, that’s what you’ll need to do. A larger down payment decreases the amount you’ll need to borrow from a lender, which means your monthly mortgage payment will be lower and you’ll be able to afford a more expensive home. If necessary, you might have to find ways to cut back, like getting rid of cable TV, bringing your lunch to work and forgoing that morning run to Starbucks. Getting a second, part-time job or another side gig, and putting any unexpected money like bonuses, raises, and gifts into your savings can help make it happen quicker too.
Reevaluate Your Expectations
If you’ve had your heart set on that four-bedroom craftsman-style home set on a large lot, you might want to reset your expectations and consider a ranch-style with three bedrooms on a smaller lot that needs a bit of cosmetic work, for example. Keep in mind that you can always upgrade later if and when your financial situation or the market changes. Location is key – look for the least expensive home in the best neighborhood that’s within your price range.
Broaden Your Search
Is there a suburb near the city you want to live in with lower-priced homes? Usually, home prices in cities are much higher than those in the suburbs, so if you’re willing to look elsewhere while still being relatively close, it might fast-track your dream of buying a home.
Look for a Home that Comes With a Rental Unit
If you can find a home that has a separate suite, or something else that can be used as a separate rental unit, renting it can be a great way to cover a good chunk of your mortgage, especially in areas with a high cost of living. Just be sure that you have at least a few months of mortgage payments saved to cover time in between renters.