For lots of people, the main roadblock to homeownership is cash. Before you shop for a mortgage, make sure you have a good handle on your income and current expenses -- and don't merely rely on the amount a mortgage broker tells you that you're qualified to borrow. (For an explanation of the criteria lenders use to decide how much to lend to you, see Nolo's article Qualifying for a Mortgage.)
Of course, if you're buying, it means you're not spending money on rent, so you can factor that amount into your monthly mortgage payment. But you need to make sure you can afford the home-related expenses above what you'd pay for rent. (For help getting your finances in order, see Nolo's article Financial Advice for Young Adults.)
If it appears that you can't afford to buy the home you'd hoped for, don't give up quite yet. You may be able to take advantage of home ownership in another way. Consider one of the following options:
Buy with someone else. You may find a family member or friend who's interested in investing in a home with you. You'd live in it and take care of it, but your co-owner would get a share of any profits when you sell. (This share would depend on what percentage of ownership you agreed on in the beginning -- it doesn't have to be 50/50.) Or, you might find a roommate who's ready for something more permanent. Of course, in that case, you'll want to make sure you can tolerate living together, especially because you may be doing so for awhile. (To learn more about buying a home with someone else, read Nolo's article Cobuying a Home.)
Buy a home and rent out a room. Instead of paying the landlord, you can become one. If you have a roommate or roommates you already know and like living with, your living arrangement doesn't have to change significantly, either.
Borrow from family or friends. Instead of trying to get a mortgage from a traditional source, like a bank, find out whether you have any family members or friends who'd be willing to lend you money. The arrangement can be set up just like a regular mortgage at market-competitive rates. (For more information on this, read Nolo's article Borrowing From Family and Friends to Buy a House).
Buy a less expensive property. Sometimes the key to buying is adjusting your sights. If you're anxious to break into the market, be flexible about doing it in a starter home. Sure, houses in the best school districts often appreciate the fastest -- but if you can't afford that area and don't plan on having kids anytime soon, it might make sense to buy in a more up and coming area with lower prices. And condominiums and townhouses often cost less than single family homes.
For all the information you need to buy your first home, get Nolo's Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder, and Marcia Stewart (Nolo).
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