Is Your Dream Home a Little Pricier Than Expected?
Picture this
You've been looking for a house for several months now. You've saved and planned. And now you've finally found the house you want to buy.
However, there's just one problem:
The house that fits all of your criteria and has left you breathlessly saying things like "We have to make an offer!" is also on the pricier end.
Are you doomed to cheaper houses? Is there no way for you to pay less and still get the house you want?
If you're in this situation and you're wondering what to do, here are four ways that you can make a more expensive home fit into your budget.
Strategy #1: Shop Around for a Mortgage Provider
When it comes to making larger mortgages more affordable, the name of the game is looking for small and steady wins. If you can save a tenth of a percent here or a quarter of a percent there, you can save in a big way.
How?
Because if you're looking at a 25-year mortgage, a few hundred dollars a month can easily add up to five figures or more. And when the house you're looking at is on the upper end of "I think I can afford this.", the lower rates you may be able to get from another lender can make a huge difference when it comes to your financial wiggle room.
Strategy #2: Bump up Your Credit Score
From a general "I want to qualify for this mortgage" standpoint, there's a lot to like about being an applicant with an attractive credit score.
You can get your foot in the door with your preferred lenders. It allows you to get your mortgage at a cheaper overall rate. And, if you fall in love with a particularly pricey house, a high credit score can help you secure more funds as long as you have enough income to make it work.
But what can you do to take your credit score up to those "How much money do you need us to give you?" levels?
The answer is that "It depends.". You may have to think about your debt situation and you may have to make some permanent lifestyle changes. Depending on your financial circumstances, you may even have to pursue additional credit to make your credit utilization ratio look better.
But between the lower rates and the reduced fees, a solid credit score can only help you if the price tag for your dream home is a little more than expected.
Strategy #3: Put a Large Amount of Money Down
There's one thing that can get you that pricier house even if nothing else changes with your mortgage application:
A larger down payment.
Many personal finance experts will advise you to put down a full 20% for two reasons:
First, because 20% is the magic number that may allow you to purchase your mortgage uninsured with certain lenders. This can and bring down your month-to-month mortgage costs a fair amount.
And secondly, because a larger down payment means that you can take out a smaller loan amount.
If the house you want turns out to be in a higher price range, that money could shake out to a 15% down payment instead of a 20% one. But it's a larger pot of money that can give you more options.
Strategy #4: Check Out the Distressed Market
When many people hear the words "distressed market", they picture boarded-up windows and properties that would be right at home in the backdrop of an apocalyptic film.
But if you're looking for ways that you can get a more expensive house at a discount, you can't write off the distressed housing market. Because all "distressed" really means in this context is that the seller is under pressure to price the house for a fast sale.
Sometimes this means that the house is in foreclosure. But sometimes the seller is leaving the state or is trying to sell after the death of a relative.
And with so many potentially great homes selling at steep discounts, you may be surprised at the quality of the houses that you discover this way.
In conclusion
In 2020, buyers faced a serious housing shortage. As a result, the whole "I didn't think I'd have to pay this much." sentiment may be more common with aspiring homeowners than you think.
However, just because the house you want to buy is a little more expensive than expected, that doesn't mean that you're automatically down for the count. You may just need to get a little more creative. Using the tips that we've just provided, landing the house of your dreams may be easier than you think even if the price tag turns out to be completely unexpected.
