If you are not bringing in a six-figure salary, then you might feel like homeownership is just unattainable. Browsing the real estate ads that feature $300,000 luxury homes and condos on the water can certainly make it seem like buying a home is only for the rich. However, many lower-income individuals do buy home each year. And you can do the same if you are patient and follow the tips below.
Live as frugally as possible to save up a down payment.
You may have heard that you need a 20% down payment to buy a home, but if this will be the first home you're buying, this is not really the case. There's a type of mortgage called an FHA mortgage that only requires buyers to save 3.5% as a down payment. However, the more you save, the better. A larger down payment means a smaller loan and lower monthly mortgage payments.
Saving money for a down payment may seem impossible now, but chances are, there are a few tweaks you can make to save up just $100 a month. In two years' time, you'll have $2,400, which is 3.5% of a $84,000 home. If you can manage to save $200 a month, you could have a down payment in just one year.
Get your credit score as high as possible.
It's a bit harder to get a mortgage with a lower income than with substantial one, but income is not the only thing banks consider when deciding whether to give you a mortgage. They also rely heavily on your credit score. So, over the next year before you buy, work on building your credit score as high as possible. Pay everything on time, use your credit card (but pay it off) and pay down any smaller debts if you can do so without interfering with your down payment savings.
Look into older homes.
It's amazing how much less expensively you can buy an older home than one that's a new build. And older homes were often made much sturdier, so you're less likely to need to make serious repairs in the future. An $80,000 home built in 1940 and updated since then is probably much better quality than one built in 2010 and selling for the same price.
In addition to following the tips above, make sure you carefully consider your budget before you start shopping. A realtor can help you decide on a reasonable budget based on your income and the housing market in your area.