Between a fluctuating housing market and sky-high mortgage rates, those in the market for a home today may find the homebuying process tricky to navigate. According to KeyBank's 2024 Financial Mobility Survey, there are three primary concerns weighing heavily on the minds of recent and prospective homebuyers: inflation (40%), competition in the market (36%), and interest rates/mortgage rates (34%). Surprisingly, just 37% of these respondents are mapping out a budget and financial plan to save for their home purchase.
Regardless of the current economic conditions, achieving the dream of homeownership is possible in any market. Here are several steps and resources available to help you meet this goal.
Tip 1: Create a Dedicated Savings Account for Your Down Payment
Putting aside money in a dedicated savings account is one of the first steps in the right direction and is the most common savings tactic (43%) among those who are in the market for a home, according to KeyBank's survey. These funds can be used at the time of purchase for a down payment, which is generally 5% to 20% of the total loan amount. However, waiting to purchase a home until you have saved more—past your goal amount—can help ensure you have emergency funds ready for any added expenses.
According to the survey, half of new homeowners (51%) expect to use more of their savings next year compared to those in the market for a home (45%) or who don't own a house (35%). Ensuring that you have extra money set aside can help you be prepared for any unexpected expenses.
Tip 2: Check Your Credit Score
When applying for a mortgage, your credit score will influence whether you will be approved. It also affects your interest rate. Among those who completed the KeyBank 2024 Financial Mobility survey and are in the market for a home or have purchased one in the last 12 months, one-third (34%) cited interest and mortgage rates as a top factor influencing their purchasing decision.
During your homebuying journey, avoid closing any active credit cards or opening new cards or lines of credit, as this can negatively affect your score. A few years in advance of shopping for your home, you can begin building your credit by opening and maintaining a credit card, such as the Key Secured Credit Card. You should also ensure that you are paying your bills on time and keeping your credit card balances low.
It's important to dispute any potential errors that may appear on your credit report before applying for a mortgage.
Tip 3: Establish a Relationship with a Mortgage Loan Officer
Meeting with a mortgage loan officer can help assess your overall finances and provide a personalized approach to finding the right mortgage. In fact, among KeyBank survey respondents who are in the market for a home or who have purchased a home in the last 12 months, just 12% said they did not or will not work with a mortgage loan officer.
Mortgage loan officers can help you plan for additional costs that may be incurred in the purchase of the home, such as moving and renovation expenses, homeowner's insurance, interest, taxes, and more. If you're not quite ready to meet with a mortgage loan officer, consider utilizing online tools, such as mortgage calculators, to further understand what is needed to purchase your home.
Tip 4: Identify Ways to Reduce Out-of-Pocket Costs
Many states and financial institutions offer assistance programs for first-time homebuyers and other borrowers. Based on your income and location, you may also be eligible for special purpose credit programs, including grants, additional loans, interest rate discounts, and other monetary assistance for closing costs and fees that may come with financing a new home.
KeyBank, for example, offers three Special Purpose Credit Programs to help borrowers with qualifying properties in eligible communities. These include the Neighbors First Credit, which provides up to $5,000 toward closing and other costs for qualifying properties, and the Key Opportunities Home Equity Loan to assist with home-improvement costs following your big purchase.
You can find more information about programs like these online or contact your bank to help you access these resources.
Sustainable homeownership is a wealth-building tool that can help families and neighborhoods grow and thrive. Navigating the homebuying process can be challenging, but with the right steps and resources, it's possible to achieve your goal. By creating a dedicated savings account, checking your credit score, establishing a relationship with a mortgage loan officer, and identifying ways to reduce out-of-pocket costs, you can make buying the home of your dreams easier.
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