Struggling to Go From Renting to Home Ownership? Seven Tips to Help You Achieve Your Dream

Making the leap from renting to owning a home can seem like an improbable dream in the face of financial challenges. With the rising cost of living, high housing prices, and all the requirements to get approved for a mortgage, it’s no wonder many aspiring homeowners feel overwhelmed. But don’t lose heart just yet!

If owning a slice of the American dream is on your bucket list, here are seven tips to help you get closer to homeownership. Each of these steps is a strategic move in your financial journey, so you can carve a path that leads to buying and staying in your home long-term.

Assess Your Current Financial Position

The first step in your home ownership quest is to truly understand where you stand financially. Here are a few things you can do to take inventory of your situation:

• Pull all three of your credit reports for free from AnnualCreditReport.com.
• Develop or review your budget to get a sense of what you can afford for your monthly mortgage payment, home maintenance, and repairs.
• Assess how much money you have for a down payment and closing costs.

The National Foundation for Credit Counseling (NFCC) can connect you to expert credit counseling services to help you streamline this process with professional guidance.

Build a Solid Credit History

Your credit scores are a critical component that lenders look at when assessing your mortgage application. But it can take time to make big changes in your scores. If your credit scores aren’t where they need to be, here’s what you can do:

• Always make timely payments on your debts.
• Reduce the amount you owe on credit cards.
• Dispute credit report errors that might be hurting your credit scores.
• Have a loved one with good credit scores add you to their credit card as an authorized user.
• Request limit increases on your credit cards, but don’t increase your balances.
• Avoid applying for new credit cards or loans before you apply for your mortgage.
• Meet with an NFCC-certified credit counselor to discuss collections debt or other credit issues.

Adjust Your Budget and Stick to It

If you’re coming up short on cash,  a well-crafted budget can help tame excessive spending and free up more funds for your down payment.

Segment your expenses into needs and wants and look to cut down on nonessential spending, even if it’s just until you purchase your home. If you can’t free up much cash, you might need to consider increasing your income through a side gig or by seeking a pay increase at work.

Get Help With Your Down Payment

The legendary down payment is (typically) your entry fee to the housing market. While traditional advice often suggests saving 20% of your home’s value, there are many down-payment programs that can get you in the game for much less.

In addition to researching national and local homebuyer assistance for down payments and closing costs, you can make progress by automating your savings and depositing your funds into a high-yield savings account (HYSA) or even a CD to earn more interest.

Explore First-Time Homebuyer Programs

There’s a full range of programs specifically designed to aid first-time homebuyers. From grants to low-interest loans, tax credits, or even reduced-cost housing, these programs are structured to make homes affordable for people with income limitations. Take the time to explore what’s available in your area; you might be surprised by the resources at your disposal.

Secure Pre-Approval for a Mortgage

Before you start shopping around for a home, work with lenders to get pre-approved for a mortgage. It can be a time-consuming process, but if you get multiple pre-approvals you can choose the most affordable one and even use the pre-approvals to negotiate better terms with the lender of your choice.

Having pre-approval also shows sellers that you are a serious buyer with the financial backing to make a purchase. Additionally, pre-approval gives you a clear idea of your available loan funds, helping you avoid the heartache of falling in love with a house that’s beyond your reach.

Don’t Forget Additional Costs

Homeownership brings with it various costs beyond your mortgage, such as homeowner’s insurance, repairs and ongoing maintenance. It’s important to factor these costs into your post-purchase budget to ensure that you can comfortably afford your new abode. The NFCC’s partner network of professional counselors can guide you through these considerations, so you’ll feel even more prepared to leap into homeownership.

Homeownership Is Within Reach—The NFCC Has Your Back

The journey to homeownership might have its challenges, but you don’t have to walk it alone. The NFCC is ready to be your guide! Connect with our partner credit counselors and get personalized support to improve your credit, manage debt strategically, and understand the financial complexities of becoming a homeowner.

It’s time to turn your homeownership dream into a reality—schedule an appointment online or call us today at (800) 388-2227!