When it comes to buying a home, some of the traditional rules may not be applicable anymore. With rising housing costs and a changing economy, individuals are finding it hard to stick to the old guidelines. However, this doesn’t mean it’s impossible to become a homeowner. In this blog post, we’ll explore some of these traditional rules, and suggest ways that individuals can navigate the new normal of buying homes.
1. Putting Down 20%
One of the traditional rules of home buying is that you should put down a 20% down payment. However, in today’s market, this is not always achievable for most people. Some experts recommend that a 10% down payment is a good alternative. Others suggest that buyers can get an FHA loan, which will allow them to put down as little as 3.5%. However, it’s important to note that a smaller down payment may mean higher monthly mortgage payments, as well as additional fees like mortgage insurance.
2. Housing Costs No More than 30% of Your Income
Another traditional rule of home buying is that your housing costs should not exceed 30% of your income. However, with increasing housing costs, this may not be feasible for everyone. In this case, it’s important to make a budget and prioritize your expenses. Consider how much you can afford to spend on your home and adjust your other expenses accordingly. It’s also a good idea to save up for unexpected expenses that may arise during the homeownership process.
3. Fixer-Uppers vs Move-in Ready Homes
There’s a common saying that goes, “Buy the worst house in the best neighborhood.” However, with current housing prices, it may not be feasible for everyone to buy a fixer-upper. This is where move-in ready homes come in. It may cost more upfront, but buying a home that’s ready to move into can save you both money and time on renovations. It’s also essential to have a home inspection done before you make an offer on a home, regardless of its condition.
4. Debt-to-Income Ratio
Your debt-to-income ratio is another essential factor to consider before buying a home. Traditionally, lenders prefer your debt-to-income ratio to be at or below 36%. However, in today’s market, some lenders are more lenient and may allow up to a 43% debt-to-income ratio. It’s important to get pre-approved for a mortgage and to know where you stand financially before you start your home search.
5. Patience and Perseverance
Finally, the most crucial rule of them all is patience and perseverance. Home buying is a lengthy process, and it’s not uncommon to face some setbacks along the way. Remain patient and continue to work towards your goals. If you’re not having much luck, consider working with a real estate agent or a mortgage professional who can help you navigate the home-buying process.
The traditional rules of home buying may have changed, but it’s still possible to become a homeowner. Putting down 20% may not be achievable for everyone, and housing costs may exceed 30% of your income. However, it’s essential to make a budget, get pre-approved for a mortgage, and prioritize your expenses. Other factors like the condition of a home, debt-to-income ratio, and patience and perseverance all play a role in the home-buying process. Ultimately, with a little flexibility and patience, you can navigate the new normal of home buying and find your dream home.
