Today’s positive housing trends may be tempting to many renters who want to become home buyers. Yet many will be shut out from getting a loan.
It may be due to poor credit or the lack of down payment funds. Still, there is a path to home ownership that many renters can take to turn their dream into reality.
What You Should Know about the Realities of the Housing Market?
It’s important to understand how home ownership has changed over the years. National and international financial institutions now dominate the loan market. There is little or no ‘hometown’ money lending. This centralized banking has slowly shrunk the number of entry points to getting a loan. It makes it hard for the average worker to qualify for a loan at a reasonable interest rate.
Adding to that reality, businesses have taken a bigger and bigger share of the available square footage. There may be plenty of places that a person could live, but much of that real estate is occupied by businesses.
Why You Must Recognize the High Cost of Renting?
Rent keeps hitting all time highs in many different cities and even rural areas. Building trends aren’t helping this, since new construction favors the well-to-do. Land speculation is also affecting this as corporations and entrepreneurs drive up prices. In some of the hardest-hit areas, tourist accommodations are more common than affordable houses.
A rental can demand a huge monthly payment. This means that many homes and apartments are now so expensive that a renter may pay more than half or even 2/3rds of their income toward housing. While a house may require an $800 mortgage payment, the rent may be $1600.
When caught in this cycle, many people give up on owning a home. They can’t save enough to make a down payment because they are paying too much in rent. Clearly, the high cost of renting is preventing renters from becoming homeowners.
How to Increase the Odds of Buying a Home?
Individuals or couples who want to own a home should not give up. They may have to reshape their lives to become homeowners, but it is also possible. The first step, if possible, is to get in a position where you are paying a much lower rent.
This may mean living with relatives and sharing rent, or it may simply mean getting a smaller home or apartment rental. Every dollar saved will need to go into savings as you get ready to purchase a modest home.
Another option is to build or buy a tiny house. Tiny houses are more affordable and sturdier than a recreational vehicle or a mobile home. You can get one for $5,000 to $10,000. If you compare that to a mobile home or RV, you will realize incredible savings. This means you could get a very small loan and become independent of often unfair, unfeasible rents.
You will need some creative storage ideas for tiny houses, but this is true for typical places to rent. Fortunately, it can be economical to rent a storage unit. This can reduce how much space you need while still maintaining the lifestyle you want. It can be where you keep your seasonal wardrobe, holiday decorations, or a memorabilia collection.
Why You Must Watch Your Debt and Savings?
In addition to saving all you can for a down payment on a home, you will need to watch over your credit. This means being smart about every purchase, especially the big ones. It also means paying off your credit card debt and being truly free of those high-interest rates. You can’t do that if you simply move the debt to a new card. That just prolongs the problem.
To encourage yourself, you can create a graph that shows the level of your debt and your savings. Each time your debt goes down or your savings goes up, you’ll see it there in black and white.
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How to Reduce Spending?
Every time you want to buy something new, it will be smart to quiz yourself on whether you need it. This is the best way to keep from running up credit card debt. It’s also the best way to start saving money instead of spending it all on each paycheck.
To determine if you should buy clothing, ask yourself if you already have something in your wardrobe like the item you are buying. If you want to eat out, ask yourself about the last time you got take-out. You should reduce that down to once a week. You’ll be surprised how much you save. If you are grocery shopping, make a list and really stick to it.
To keep this from being a chore, you should build in treats for yourself. Every month, for instance, you could set aside money for a new wardrobe purchase. You could keep count of the number of days you don’t eat out and save up for a special restaurant meal.
How to Protect Your Money?
It may sound silly to say “don’t get swindled”, but it’s important to say it. In this day and age, there are people trying to take your money from all sides. You need to guard your identity and your money. If someone offers you a “get-rich-quick-scheme”, say no. That goes double for offers we get over the internet in emails and advertisements.
Likewise, don’t get caught up in a pyramid scheme. That’s where a company convinces people to sell their product. However, they aren’t paid. Instead, they buy the product on speculation. Many people have fallen for this lie over the years. They often believe the lie until they are in debt and have an apartment full of products that no one will ever buy. If someone tries to get you to invest in a scheme like this, walk away fast.
Why You Should Put Off Car Ownership?
If you need to buy a car, consider public transportation. After all, a car is costly. You will be paying maintenance, repairs, insurance, gasoline, and taxes. That’s in addition to taking out a loan. Furthermore, many car loans for used cars can leave you upside down. That means you still have a loan, but the car has broken down completely. If you already own a car, keep it parked as much as possible. It may last longer and cost you less in repairs.
This doesn’t mean you have to stop driving. You can still rent a car from time to time and go on vacation. You can also rent pickup trucks for brief intervals if you want to move some furniture you bought on an internet marketplace.
It may take a few years for you to accumulate the savings you need for home ownership, but when you do, your credit will be good, and your money habits will be steady. At that point, you should be able to claim your reward: a good interest rate on a home you want.