The goal of home ownership may seem like a pipe dream if you are on a tight budget, but there are ways to make that dream come true. You might not be able to get exactly what you want, when you want it, but you can afford a home even with limited resources.
Make Some Compromises
A tight budget means making some compromises. Garden-level units, properties on a busy street or houses in a town without a top school system all cost less than homes located in areas considered more desirable. They may still be very nice places to live and make good starter homes. Remember, too, that schools don't matter until you have a five-year-old. Separate your wish list from your must-haves, and you may discover that by giving up a spare bedroom, deck or attached garage, you can find a property that fits into your budget.
Don't rush into home ownership. If your credit is not that great, take some steps to improve it first so that you can get a better mortgage interest rate and reduce your monthly payments. Similarly, taking extra time to grow your down payment will reduce the amount you need to borrow and avoid the costly private mortgage insurance you'll be forced to buy if your down payment is less than 20 percent. Lower payments over the life of the loan will make your tight budget stretch a little farther.
Being a landlord brings its own set of headaches and is definitely not for everyone, but buying a property with income potential might be just the thing that loosens up your budget. If you can tolerate a roommate, taking in some rent and sharing home expenses will help defray costs. Sharing living quarters may not be right for you, but a two-family house or a separate rental unit might work instead. Crunch the numbers, but be conservative with your estimates and keep in mind that you might have occasional vacancies.
Renting to Own
Lease options are not common, but they are a possibility. In a nutshell, you rent a place with an option to buy it outright in a few years. You pay more per month than with a regular rental, but some of the money is applied towards a future down payment. Initial costs are a lot lower than a mortgage. There is some risk if you decide later not to buy the house, because you lose the extra rent and some fees. It's a tricky option that you'll have to investigate closely, but lease options are appealing to both buyers and sellers.
Cosmetic Fixer Upper
Homes that need a lot of work are more affordable than comparable places in good condition. You must be very careful, however, to avoid buying a money pit that requires a lot of costly repairs and maintenance. Outdated kitchen cabinets and hideous paint colors will turn off other buyers and lead to a lower price, while with a little elbow grease and a small amount of money you can turn an ugly house into a thing of beauty. Conversely, a leaky roof or a dinosaur of a furnace is a budget buster. Stick to cosmetic fixes, and you may find something within your price range.
- home, image by Greg Pickens from Fotolia.com
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