Home prices are near all-time highs, and recent interest rate hikes have made buying a home more expensive.
Still, you've been saving and planning and are ready to buy a new home. It just needs to be affordable and the right home for your family.
Creating lists, reading online articles and getting information from different sources are excellent ways to start your journey. Preparation for other life events pays off; why would buying a home be different? Use this guide to help find an affordable home that is right for your family.
Discuss Your Family's Basic Home Requirements
You're looking for the best affordable home for your family. Because of that, you must determine what your family needs regarding bedrooms, bathrooms and things like a home office or guest room.
Your spouse may want an office or guest room. They may want to try and avoid living in a two-story home, and the kids may enjoy a neighborhood with parks, greenbelts, a clubhouse and a community pool.
It's an easy step and may seem unnecessary, but it's worth taking the time to ask and will make everyone feel involved. Plus, it's an excellent time to get everyone on the same page and may help avoid future conflicts.
Remember, you'll be living in the home for years. Knowing you've considered possible future events like a new family member and have heard everyone's opinion before buying your new home is reassuring.
Specify Your Goals in a Concise Statement
Describe what you want to do in a concise statement. It's a helpful way to get the whole family involved and excited. Plus, it will keep you focused and come in handy when you're telling professionals what you want. Check out a couple of examples below.
Examples
- We are looking for a one-story new construction home with three bedrooms and two bathrooms near Denver. We want to move as soon as possible.
- We are looking for a brand-new two-story home with five bedrooms and at least two bathrooms in San Antonio. We want to live in a master-planned community and need to move in six months.
You'll add at least two more pieces of information to your goal statement, so keep it handy. When it's finished, it will be helpful when you're talking with people about the home you want.
Find Out Home Much Home You Can Afford
Knowing how much home you can afford is vital. Learning this information before searching will help save time and set your expectations.
Lenders use the
28/36 rule for conventional loans. In short, the rule suggests keeping your monthly mortgage and other housing costs at or below 28% of your monthly income; your total monthly debt obligations should be at or below 36%.
Following the 28/36 rule is suitable for determining how much you can comfortably afford and is a more conservative approach. By following the rule, financing should be more accessible, and you're less likely to overextend yourself financially.
FHA lenders and others use different debt-to-income (DTI) ratios to determine how much you can allocate to monthly housing costs. For example, FHA loans allow a 31/43% split, and Energy-Efficient FHA loans allow a 33/45% split.
Use this information and an
online calculator to determine how much home you can afford. Remember that most homebuyers qualify and opt to secure FHA loans. If the 28/36 rule tightens things, try the 31/43% DTI to determine how much you can afford.
If you are a two-income household, use both incomes to learn how much money you can put toward your monthly housing costs.
Below is an example using a gross monthly income of $5,000/month:
28/36%
Housing costs: 5,000x0.28 = $1,400
Total debt obligations: 5,000x0.36 = $1,800
31/43%
Housing costs: 5,000x0.31 = $1,550
Total debt obligations: 5,000x0.43 = $2,150
Find out How Much You Need for a Down Payment
A down payment is the money you pay upfront to secure a mortgage. The minimum down payment required is different for everyone and depends on many factors. The standard down payment is 20%, but most homebuyers put down less and pay for private mortgage insurance or PMI to secure financing.
Some government programs and loans guaranteed by the government help buyers secure mortgages with no down payment. Most homebuyers secure
FHA loans, which require a down payment of 3.5%; use this amount if you are eligible for an FHA loan, plan on getting one and do not want to put additional money down on your home.
Below are examples of different down payment amounts using a home that costs $320,000.
20% down payment - 320,000 x 0.2 = $64,000
3.5% down payment - 320,000 x 0.035 = $11,200
Get a Prequalification Letter for Your Mortgage
Prequalification is not the same as pre-approval. It is a quick financial assessment based on what you tell a lender and usually takes a few minutes to complete.
A prequalification letter will give you confidence that you can afford the homes you view. It shows sellers you're a serious buyer and may help you win a bidding war against buyers without one.
Finish Your Goals Statement
After prequalification, you have everything you need to complete your concise goal statement. With a prequalification letter and information about how much of a house you can afford, you can quickly tell homebuilders and others exactly how they can help you. View examples of the extended goal statements below.
Examples
- We are looking for a one-story new construction home with three bedrooms and two bathrooms near Denver. We are prequalified and are looking for a home priced between (add your price range). We want to move as soon as possible.
- We are looking for a brand-new two-story home with five bedrooms and at least two bathrooms in San Antonio. We have a prequalification letter and would like to find a house from the (add your price range). We want to live in a master-planned community and need to move in six months.
Use your goal statement to start conversations with homebuilders and real estate professionals and as a reminder to keep you focused while looking for the right, affordable home for your family.
Create a List of Home Features Your Family Wants
You and your family should work together to create a list of everything you want in your new home, including things you want to avoid. It may take a few conversations, but finding the right home for your family is paramount. Take your time and be specific.
Discuss everything from the flooring, floor plan and kitchen to outdoor features like the size of your backyard and if you prefer finished landscaping. List the features you want and identify essential elements and things that would be 'nice to have.' This dialogue will allow you and your family to discuss compromises and resolve differences.
The objective is to finalize everything your new home must have, including optional features you would like and items you don't want in or around your home. Be sure to talk about non-negotiables like a chef-ready kitchen, an office or a location with easy access to freeways.
Preparing this beforehand is a great way to save time and avoid awkward conversations in a builder's sales office or around your real estate agent.
Tip: We include a designer package of upgrades and integrated technology in every home we build at no extra cost to the homebuyer. You can learn more by checking out our
CompleteHome designer package.
Decide on a Location for Your New Home
A home's location is often a big part of its price; it's also one of the most important factors for homebuyers. You may need to compromise on location to find an affordable house.
The good news is that new home communities are usually in quiet locations, which is the
number one priority for most homebuyers.
Builders develop new home communities in growing towns, small cities and rural places near major metropolitan areas. Compared to the city, these areas are quiet and peaceful. New parks and community amenities make them ideal places to raise a family.
Homebuilders typically build communities near each other, so you'll likely find homes from multiple homebuilders. Identify locations with new home communities and note areas that interest you.
Limit Your Search to Homes in Your Budget
You've decided to be prudent and avoid overspending on your new home. The best way to stick with this decision and avoid temptation is to
limit searches to homes in your price range. The quick, simple, easy way to start your home search is online.
After settling on a location, jump online to begin your search. Visit homebuilder websites and use your favorite search engine to find websites with new home listings.
Use search filters to limit your options to homes that meet your needs and are within your budget. Eliminate homes that don't meet your family's wish list, and save the homes you like so that you can review and compare them with your family. When you finish, schedule a tour of the homes you want to see. You may find the right home for your family without leaving the house.
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