Can't Afford Your Housing Market? Try These Tips

Affordability is an issue in major markets all over the United States. Here’s how to make finding a home more affordable, no matter what your circumstances or goals.

One of the biggest struggles hopeful homebuyers are facing right now is finding the right home at the right price. Rising demand and lower affordability, caused both by the pandemic and by demographic shifts, have made it ever more difficult for people to find the home they want, the location they want, and a price they can afford to pay. 

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If you feel like you can’t afford to buy a house, you may be surprised to know that there are still options available. In fact, you may be closer to becoming a homeowner than you realize. What it takes is patience and adaptability to make your real estate dreams a reality. Fortunately, with the assistance of a trusted lender and real estate agent, you can create a plan to help you achieve your goals.

What if you can't afford to buy a house in your area?

If you get laser-focused on a particular neighborhood, it can be difficult to adjust your thinking and find something that’s more affordable. After all, you may love the neighborhood for its proximity to your favorite shops and restaurants or for its convenient commute to your workplace. Here are some home search possibilities if affordability is becoming a barrier to home ownership in your case:

Broaden your search area

Of course, this may be the simplest option. Ask your real estate agent about neighborhoods that are similar to the one you’ve been eying, but that offer more affordable options. Remember, too, that you may find more affordable options in an up and coming neighborhood that doesn’t yet have all of the amenities of your target community, but will in just a year or two.

Re-think your wishlist

It can be easy to expect to walk in on day one and have all of the fancy fixtures and finishes you’re used to in your rental property or in your parents’ house. In reality, however, half of the fun of homeownership is putting together the home of your dreams over time. Consider a fixer upper or a home that’s missing some of the items on your wishlist, then add them over time on your terms.

Save more for your down payment

The more you save for your down payment the easier it will be to qualify for a mortgage at better terms. Cash is king when it comes to buying a home, so the more cash you have on hand the easier your process will be.

Look into alternative financing options

Talk to your lender and your real estate agent about alternative financing options like interest-only mortgages, rent-to-own, and other options that are available to you. In some cases, you just need to get your foot in the door, so to speak, and then you can revert to a more standard, fixed-rate mortgage in a year or two.

How can I buy a house if I don't have enough money?

You actually have options for buying a house, even if you don’t have the money to do it all yourself. You may find that you have friends or family members who are in the same boat and would like to go in with you on the purchase of a home. 

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If you decide to go this route, make sure that you have an attorney walk you through an agreement to cover the responsibilities of each party in regard to expenses, repairs, utilities and other items. In addition, make sure you know what will happen in the event that one of you wants to pull out equity or sell your share and buy on your own.

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Another popular option is “house hacking.” This involves purchasing a house that has a rental unit included, for instance: an ADU (accessory dwelling unit), apartment, or a multi-unit property like a duplex, triplex or quad. You live in one unit and rent out the others, letting the rental charges pay your mortgage while you build equity for free. If you want to make this go even further, consider living in the smaller rental unit and renting out the larger portion of the property. This may allow you to build equity even faster.

What happens if I buy a house I can't afford?

Unfortunately, this is a real thing that happens to people and it can have devastating financial repercussions. Making a decision about affordability starts with taking an honest inventory of your individual situation before you buy.

• Do you have high levels of consumer debt and do you frequently live beyond your financial means?
• Do you have unstable employment or income or is your income highly dependent on variable factors such as the weather, a small consumer niche, or hyperlocal market conditions?
• Do you plan to stay in the area for at least the next three to five years? Selling within a year or two may not allow you to recoup your initial investment in the property.
  
  
  

If you find yourself struggling to pay the mortgage each month, consider the following options:

• Bring in a roommate to help pay part of the mortgage
• Turn a portion of your property into a rental unit. If you live in a desirable tourist area, consider making that unit an Airbnb or other short-term rental property.
• Rent out your home for the full amount of your mortgage payment, and find yourself a more modest home that you can afford more easily.
• Talk with your trusted real estate professional and find out if you can sell your home for enough to get you out from under the debt you’ve taken on.
  
  

If you decide to go with a rental option, you’ll need to determine how this will impact your tax picture and if there will be extra expenses from property management or the preparation of the space for rental. Make sure that a rental makes sense in your individual situation.

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