“Overcoming Homebuying Challenges: Tips for 2023”

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In This Article:

• Give Yourself More Time
• Keep Saving Money
• Pay Off Debt
• Stay Connected to Your Agent
• Expand Your Search
• Stick With Renting
• Apply for Homebuying Assistance Programs

If you’re finding it difficult to buy a home, you’re not alone. In 2023, the median sales price of an existing home reached a record high of $389,800, according to the National Association of Realtors (NAR). With low inventory and the lowest number of existing-home sales since 1995, it’s a challenging time for homebuyers.

However, all is not lost. There are several strategies you can consider if you’re priced out of buying a home. Here are seven moves to think about:

1. Give Yourself More Time

Pausing your search might be all you need for market conditions to improve and for your dream home to become available. Experts predict that mortgage rates will drop in 2024, potentially encouraging more homeowners to sell and improving inventory shortages. Lower mortgage rates will make buying a home more affordable and give you more room in your emergency fund and retirement savings.

2. Keep Saving Money

More time also means more opportunity to save for a down payment, which can make your offer more attractive to sellers. In 2023, the typical first-time buyer made a down payment of 8%, the highest since 1997, according to NAR’s 2023 Profile of Home Buyers and Sellers. On a $389,800 home, that’s $31,184—and in very competitive areas, a down payment closer to 20% is desirable. Automating your savings and setting aside windfalls like bonuses, gifts, and tax refunds will help as well.

3. Pay Off Debt

With high mortgage rates, it’s crucial to lock in the lowest interest rate possible. This means paying off debt, especially revolving debt on credit cards and lines of credit, which can help increase your credit score. Paying off debt will also reduce your debt-to-income ratio (DTI). Mortgage lenders typically want to see a DTI of 43% or less, and with a DTI of less than 36%, you’ll be in an even better position to get a low rate.

4. Stay Connected to Your Agent

Don’t lose touch with your real estate agent, as they’ll be a great resource for keeping tabs on the areas you want to buy in. Just because there’s nothing in your price range now doesn’t mean something won’t hit the market in a few months. Or, if you or your partner suddenly get a raise and have more cash to work with, staying close with your agent can help you get out that message ASAP.

5. Expand Your Search

You may be able to find a home within your budget if you change up your search. Can you work with fewer bedrooms or bathrooms? A geographic area you’d previously skipped over? An additional 10 minutes of commute time? It can be helpful to have deal-breakers, which help narrow down your options. But in a low-inventory housing market, flexibility goes a long way.

6. Stick With Renting

This one is a mindset shift: It’s OK to keep renting, potentially for several more years. It can help to put home ownership into a global perspective. In the fourth quarter of 2023, the U.S. homeownership rate was 65.7%, according to the Federal Reserve Bank of St. Louis. But in Colombia, Germany, and Switzerland, for example, renting is more common than owning, according to 2022 research by the Organisation for Economic Co-operation and Development.

With mortgage rates and monthly mortgage payments so high, renting may not be such a bad deal. From 2020 to 2023, the typical monthly mortgage payment on an existing single-family home bought with a 20% down payment more than doubled, according to NAR.

7. Apply for Homebuying Assistance Programs

If you haven’t yet looked into state or federal homebuying assistance programs, explore which ones you qualify for. Or, if you expand your search to new areas, see if there are additional programs that could help you afford a home.

First-time homebuyers in particular may have several options in their city or town; FHA, USDA, and VA loans can also get buyers in the door with low down payment mortgages. State and federal down payment assistance programs may also be available depending on your income.

The Bottom Line

While it might be disheartening to recognize that you can’t afford a home right now, it’s likely only temporary. Stick to your plan and continue to take steps to meet it. Every extra dollar you save, every extra point added to your credit score, and every additional home that shows up in your search brings you closer to your goal. And if you decide to keep renting for a while, know that’s a worthwhile option too.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you navigate your homebuying journey.

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