Achieving homeownership comes with a few hurdles. You must identify your desires and needs for your dream home while staying within your budget.

    Qualifying for a mortgage adds another layer of complexity. It might seem tempting to resign yourself to a lifetime of renting. As a real estate agent for over two decades, I’ve successfully guided hundreds of clients through home purchases.

    Despite the challenges, you can find an affordable home and start living the American Dream — if you’re careful and make the right moves, as outlined below, in financing and property hunting.


    1. Do Your Research

    Before starting your home search, take time to educate yourself on the home-buying process and terminology. Understand key financial concepts like debt-to-income ratio, credit score, fixed and variable interest rates, and closing costs. Read articles, guides, blog posts, and forums to immerse yourself in the process to prevent surprises down the road.


    2. Revamp Your Monthly Budget

    To purchase a home, you want your debt-to-income ratio to be as low as possible to qualify for a mortgage — which means you need to pay off debt.

    Take a close look at your monthly expenses. Find ways to cut back to free up more cash. Cancel unused subscriptions, dine out less, and reduce entertainment costs. Small changes add up over time. Use an app to track your expenses and identify unnecessary purchases. 

    Search for creative ways to increase your income — sell unused items, pick up a side gig, negotiate a raise at work. The extra money you make and save goes into paying off debt and accumulating a down payment on your home.


    3. Develop a Debt Strategy

    With more money in the bank, start paying off your debt strategically. When paying down debt, focus on high-interest accounts while making minimum payments on everything else. Create a debt payoff plan rather than attacking debt randomly. Automate payments to avoid late fees. As each debt is paid off, roll that payment amount into the payment on the next account. Little by little, you’ll make progress.

    Today’s Homeowner Tips

    Credit card debt poses a significant obstacle to home buying by adversely affecting your debt-to-income ratio. Paying down debts ahead of time will put you in a better position when applying for a mortgage.


    4. Boost Your Credit Score

    Paying down debt improves your credit score, which is another important piece of the puzzle when it comes to qualifying for a mortgage.

    In addition to paying down balances, take steps to actively improve your credit score. Get copies of your credit report and scan it for errors. Dispute accounts and charges that are inaccurate. Lenders consider everything in the credit report — they need to know you pay off debt timely and use it responsibly.

    Limit inquiries on your credit report by only applying for the credit you need. Keep your credit use low. Payment history and credit utilization are major factors in your score — pay all bills on time and keep balances low compared to limits.


    5. Raise Cash for a Down Payment

    The best mortgage terms are achieved by improving your credit score and increasing your down payment. If you can make a down payment of 20%, you’ll receive favorable terms and avoid paying for private mortgage insurance, which results in lower monthly payments. 

    Saving up for a sizable down payment can take some time.  Accelerate the process by cutting discretionary spending, earning supplemental income, or tapping into other fund sources such as a 401(k) loan or gift from family. Down payment assistance programs through nonprofits, employers, or government agencies are another option, but they have eligibility requirements.


    6. Shop for a Mortgage

    Home loans are diverse — don’t speak with just one lender. Borrowers who compare loan quotes save money on rates and fees. Mortgages vary widely, so shop around for the best terms. Compare interest rates, fees, loan types, and lender reputation. Get pre-qualified with your lender of choice. Understand all the terms of a loan before committing.


    7. Choose the Right Agent

    A knowledgeable real estate agent does more than just tour homes with you. Real estate agents provide key services like referring you to mortgage professionals, coordinating inspections, negotiating offers, and handling paperwork. Agents know local neighborhoods and property values. Give them a wish list, and they can search for home options within your budget. 

    Pay attention to reviews and determine the best real estate agent for you based on word-of-mouth referrals and online testimonials. Interview several agents and ask about experience, specialties, communication style, and past client reviews. Make sure your personalities mesh well — you’ll be communicating frequently.


    8. Look at Fixer-Uppers

    Tell your agent that you’re willing to do renovations, and you might find a property that is priced lower due to condition.

    Of course, there are limits to the wear and tear you should take on. You may need specialized inspections to locate potential deal-breakers. Carefully inspect for issues like foundation cracks, roof leaks, and faulty wiring. Factor repair cost estimates into your budget. 

    Fixer-uppers often sell for less than move-in-ready homes, allowing savvy buyers to build equity through renovations. 


    home renovation
    Image Credit: Canva

    So, Is It Possible to Find an Affordable Home?

    Yes, it is possible to purchase an affordable home. The key is proper planning, saving, and compromising where you can. With mortgage readiness, budget adjustments, smart shopping, and creativity, many buyers can achieve homeownership.

    Patience and persistence are required, but the payoff of owning your own home makes the effort worthwhile.


    FAQs About Finding an Affordable Home

    How much do I need for a down payment on an affordable home?

    The minimum down payment on an FHA (Federal Housing Administration) loan is 3.5% of the purchase price. A down payment of 20% or more gets you the best mortgage terms. Evaluate down payment assistance programs and know the tradeoffs of a smaller vs. larger down payment.


    What's the best mortgage option for an affordable home?

    Options like FHA, VA (Veterans Administration), and USDA (U.S. Department of Agriculture) loans allow low down payments. FHA has low down payment requirements but an added mortgage insurance fee. Compare the interest rates, terms, fees, and conditions of different loan types.


    Should I use a real estate agent when trying to buy an affordable home?

    Yes. A knowledgeable agent provides expertise in negotiating offers, identifying homes not yet listed, coordinating showings, handling paperwork, and more.


    What costs should I budget for when buying an affordable home?

    In addition to the down payment, budget for lender closing costs, inspection fees, moving expenses, homeowner’s insurance, property taxes, homeowners association fees, and maintenance.


    Editorial Contributors
    avatar for Laurie Engle

    Laurie Engle

    Expert Writer & Reviewer

    Laurie Engle is a freelance writer who provides insights to homeowners on topics such as the home warranty industry, relocation issues, and real estate trends. As a licensed Realtor since 2001 Laurie has acquired extensive expertise in dealing with home warranty companies and navigating the intricacies of the real estate market. In addition to her commitment to helping clients with their home buying and selling needs, she maintains a sharp awareness of market dynamics, including property values, interest rates, and local regulations.

    Learn More

    photo of Lee Ann Merrill

    Lee Ann Merrill

    Chicago-based Lee Ann Merrill has decades of experience writing and editing across a wide range of technical and scientific subjects. Her love of DIY, gardening, and making led her to the realm of creating and honing quality content for homeowners. When she's not working on her craft, you can find her exploring her city by bike and plotting international adventures.

    Learn More