For the majority of people, becoming a homeowner is a dream and an aspiration. In fact, the average person – someone who’s not a major investor or a business owner – will see buying a house as the single biggest investment of their lifetime. This will be the most valuable asset that they own, but getting to that stage can be a challenge.
Now, we all know that homeownership rates among Millennials and Gen Z are not that great, even for their age, when compared to previous generations, that is. Does this mean that buying a house in this day and age is impossible? Of course not! After all, housebuilders were in huge demand in 2023, and someone has to buy these homes, right?
Sure, buying a home is difficult, but every challenge can be navigated. To help you overcome this obstacle, here are several tips you should hear.
1. Create a budget
The first thing you need to do is figure out how much house you can afford. There are a lot of great online calculators out there, and while they’re not 100% precise, they can help you get a general idea of what you’re working with.
This way, you’ll also get an idea of total costs, like property taxes, monthly credit insurance, and more. The calculator takes into account your income, your debt-to-income ratio, credit score, loan term, etc.
Then, you need to figure out where you want to live. The location is a huge factor here, especially since the costs of property will vary based on the neighborhood. For instance, moving into a “cheaper” neighborhood means that you can get a much larger or more luxurious place for the same amount of money.
At the end of the day, the most important thing you have to do is set your budget. How much can you afford to spend on a house? Sure, you may be willing to budge for the perfect home and the deal of a lifetime, but even then, the percentage by which you’re willing to deviate shouldn’t be that extreme.
In short, the first step in owning a house lies in figuring out your own finances.
2. Find money for a downpayment
The downpayment can be anywhere from 6% to around 20% of the purchase price of a home. Since homes are incredibly expensive assets, these 20% can be a small fortune. So, where do you get the money from?
Generally speaking, people get money from their own savings accounts, while some borrow from their friends and family.
The latter sounds like a better idea than it is in reality. Sure, friends and family won’t charge you interest and could be a bit more lenient with their repayment terms, but this is exactly why you don’t want to take advantage of them. Think about it: you’ll immobilize a sizable chunk of their funds for a while, and if you fail to pay them back, you risk a relationship with someone who loves and trusts you enough to part with that kind of money.
Those who are a bit more proactive get this from a second job or a side hustle. Even something as simple as tax refunds can be used to bolster a down payment fund.
Those who think ahead of time can start saving or investing money early. Finding the right investment platforms in the UK and placing a few adequate trades can earn you just enough for this down payment.
It’s also worth mentioning that there are a lot of down payment assistance programs, employer assistance programs, and similar grants that are there to help people become first-time homeowners.
3. Improve your credit score
People who can afford their first home without a mortgage are incredibly rare. In fact, if you’re one of the people in this category, good for you, but also, any advice that we give out in this post is completely redundant in your case.
Now, since you don’t already own a property, you likely lack any kind of collateral for a secured loan. This means that your credit score will play a huge role in your loan repayment terms. This will determine how much money you can get, how long until you have to pay it back, etc.
To boost it, you must first understand it. There are several factors that go into your credit score. These are factors like the total amount of money that you owe, the number of loan types that you currently have, and your credit history length. This means that closing that credit card that you’re no longer using might not be as good of an idea as you thought at first.
Also, bear in mind that while buying a home is a massive step in your life, it’s not a finish line. This mortgage that you’ve just got is an amazing opportunity to boost your credit score. It’s a huge debt with a lot of credit payments (spanning decades). In other words, it’s a perfect opportunity to prove to financial institutions that you’re actually creditworthy.
4. Consider all your options
Before you make any major life or financial decision, it’s crucial that you reconsider your priorities. Do you just not want to pay rent? Is just owning your home a worthy enough goal, or does it have to be your dream home? How big of a priority is space?
Remember that some people see owning a home as an investment, not just an improvement in quality of life. After all, you can borrow against the equity in your home, sell it, and do a number of different financial actions. None of these things are to be dismissed too easily.
Still, if just owning a place is a goal, you might want to read up a bit on the tiny house movement. According to one survey, 68% of tiny house owners have no mortgage. This is true for just 29.3% of regular homeowners.
It’s not just the mortgage. With a smaller home, every other expense goes down, as well. The cost of utilities, property taxes, and everything else is proportional to the size of the place.
5. Negotiate and shop around
While you may not think it’s worth your while, it’s generally not uncommon for a home buyer to successfully negotiate down up to 5% of the purchase price. These 5% are a significant amount, and it’s definitely worth your while to give it a go.
Remember one thing, if you’re tactful and considerate, no one will get offended by your suggestion that a price be lowered. After all, you’re not asking for 20% off; you’re merely asking for 2-5% off the total price.
Also, you might want to shop around a bit. Ask for quotes and offers, but never settle for just one option. Sellers can sense desperation, and if you’re considering several options, you’re definitely not desperate. It’s a simple tactic like this one that can help you the most.
Buying your first home is a worthy goal, even if it’s hard to achieve
Having a place of your own is about more than just not paying rent. It’s about owning a property that you can pass on, sell any time you want, or do with as you please. It’s about having a place that you can truly call your own. It’s not just an investment, it’s a major life achievement. So, hard as it may be, it’s definitely something worth grinding for.
