We've all dreamed of buying the perfect home. Whether it's on the water, surrounded by a white picket fence, or filled with gorgeous finishes, everyone has an idea of that dream home, the one they've wanted all their lives.
Of course, dreaming of a home and actually being able to qualify for a mortgage to afford that home are two different things. The good news is that with enough planning and saving, you can afford the home you've always wanted.
How to Afford Your Dream Home
Do Your Research
The first step to the home buying process is to do your research. You need to speak with an experienced real estate agent who can let you know more information about particular neighborhoods, such as which ones are appreciating quickly and which ones to avoid. A real estate agent can also tell you about different school districts and which areas are best for your stage in life. They also help you avoid common buying mishaps, which can save you a lot of money during the home buying process.
Once you know where you want to live, you can start researching prices to determine just how much it will cost to afford a home in your top location. Once you know the cost, you can use a mortgage calculator to see what a monthly payment would be in your dream zipcode. You can also use a home affordability calculator to help figure out how much house you can afford. which will allow you to filter out houses priced too high but might not let you find your dream house.
Think Outside the Box
If you go through those steps and you realize your dream home is too expensive for you, think outside of the box. Can you purchase the home and then rent one of the rooms? Can you buy a fixer upper in the perfect location and transform it into your dream home as time and money allows? Can you buy the absolute worst house in the best neighborhood?
When you think outside of the box, sometimes you can find hidden potential that will allow you to have your dream home whether it's right now with a roommate or in the future as you renovate an existing home into the one you want.
Save a Large Down Payment
When you don't pay a 20 percent down payment on a home, you often have to pay what's called Private Mortgage Insurance (PMI). This insures the lender against a borrower's inability to pay. Buyers who put down less than 20 percent are considered more risky, so they have to pay this insurance payment each month.
For this reason, it's wise to take your time and save up the 20 percent down payment, because PMI can add a couple hundred dollars to your bill every month, money you could have used to save for improvements or other necessities.
It All Comes Down To You
Ultimately, it all comes down to your priorities, your preferences, and your ability to save large sums of money for a key goal. Anyone can afford their dream home, whether it's a little cottage in the woods or a large mansion on the beach. They just have to work hard, continue to increase their income, do their research, ask lots of questions, and sacrifice in other areas in their life so they can afford a large down payment and make their dream of home ownership come true.