According to a recent study, most Americans interested in purchasing a home are cash-strapped. Many potential homebuyers are burdened by student loan debt, credit card debt, and other forms of debt. As a result, many people simply cannot save enough money to purchase a home.
The good news is that there are a few things that cash-strapped shoppers can do to achieve their dream home purchase. Knowing your options is the first step to taking control of your finances and making your dream home a reality.
Get Pre-approved for a Mortgage
A mortgage pre-approval is an estimate of how much you will be able to borrow based on your income, employment, and credit history. This estimated loan amount can give you a much-needed leg up in the home buying process. With a mortgage pre-approval in hand, you will have a better idea of how much you can afford to spend on a home.
You can also use your pre-approval letter to show sellers that you are a serious buyer ready to make an offer. In today’s competitive housing market, being armed with a mortgage pre-approval can give you the edge you need to snag your dream home. Thankfully, there are many mortgage options available for cash-strapped shoppers.
If you have a low credit score, you may want to consider an FHA loan. These government-backed loans allow homebuyers to purchase a home with as little as 3.5% down. The catch is that you will be required to pay mortgage insurance, which will increase your monthly payments.
Another option for cash-strapped shoppers is to get a conventional mortgage with private mortgage insurance (PMI). You can put down as little as 5% of the purchase price with this type of loan. You can cancel PMI once you’ve reached 20% equity in your home.
Before getting a mortgage pre-approval, knowing your options can help you choose the best loan for your needs. This will also give you a better idea of how much you can afford to spend on a home.
Save Up for a Larger Down Payment
Saving for a higher down payment on a home can be difficult, but it can pay off in the long run. Cash-strapped buyers can avoid taking out a large mortgage loan by putting more money down upfront. This can save thousands of dollars in interest payments over the life of the loan.
In addition, a higher down payment may help buyers qualify for a lower interest rate. This can further reduce the amount of money that needs to be paid overtime. Of course, buyers need to be careful not to deplete their savings to make a higher down payment.
When buying a house, saving for a larger down payment can be a smart financial move. This can help cash-strapped shoppers avoid too much debt and make their dream home purchase more affordable.
Look for Homes in Your Price Range
When searching for a new home, staying within your budget is essential. Keep in mind that you will also need to factor in repairs, maintenance, and other associated expenses. It’s easy to get caught up in the excitement of buying a new home and spend more than you can afford.
To avoid this, shoppers should only look at homes within their price range. Once you’ve found a few homes that meet your needs, you can then try to negotiate with the seller on the price. In some cases, sellers may be willing to accept a lower offer if they know that the buyer is serious about purchasing the property.
Ask Your Seller to Pay the Closing Costs
If you’re buying a house and don’t have a lot of extra cash on hand, you might be wondering if the seller can pay your closing costs. The answer is maybe. While it’s not common, some sellers are willing to help out buyers with closing costs, either as a gesture of goodwill or to sweeten the deal and make their homes more attractive to buyers.
If you’re interested in asking the seller to pay your closing costs, it’s essential to do your research and find out if it’s something that’s allowed in your state. You’ll also need to be prepared to negotiate with the seller and make a compelling case for why they should pay your costs. With a little bit of effort, though, you may be able to get the seller to help cover your closing costs.
Buying a house even when you are short of cash is no longer impossible. With a little bit of patience and perseverance, cash-strapped shoppers can find the perfect home without breaking the bank. By getting pre-approved for a mortgage, saving up for a larger down payment, looking for homes in their price range, and negotiating with the seller, shoppers can make their dream home a reality.