The American dream of being a homeowner is alive and well. In fact, 74 percent of Americans regard homeownership as a marker of economic success, ranking it ahead of the ability to retire (66 percent), being successful in one’s professional life (60 percent), and even having a family (40 percent).

Homeownership Benefits

Buying a home is usually the biggest purchase most people will make in their lifetime, and although affordability has been the biggest barrier for homebuyers over the past few years, there is no getting around that homeownership is still a great long-term investment.

Tax benefits

In order to receive homeowner tax benefits, you must itemize your tax return and these benefits depend on your filing status and income. There are many tax breaks that the IRS offers which can offset your homeowner costs—many states will actually match the federal tax breaks.

Home appreciation

According to the  National Association of Realtors® (NAR), home values are still up 7 percent cumulatively over the past ten years, and it’s expected that there will be a 10 to 15 percent increase in the number of new households in the US over the next ten years. As a result, the demand for housing will remain high.

Build equity

Each time you make a mortgage payment, the more equity you will add to your home. And when you’re ready to sell, you’ll be able to put that equity into savings or toward the purchase of your next home. Unlike rent, owning a home means more money in your pocket over time.

Stability

Purchasing a home helps you to build long-lasting relationships with your neighbors, become part of a community, and provide ongoing stability for you and your family.

Predictability

Having a fixed-rate mortgage provides comfort in knowing that your monthly payment will remain the same over the life of the loan, whereas rent costs can go up yearly and may eventually exceed your budget.

Autonomy

When owning your own home, you have freedom of expression to do what you want. And with this freedom comes flexibility, security, and control. If you live in a community with an HOA, you might experience some restrictions but typically far less than you would while renting.

Develop a homebuying plan

Because housing markets go through cycles with shifts in pricing and overall affordability, available inventory, and swings in mortgage interest rates, you will need to determine if it’s the ideal time to pull the trigger on purchasing a home. Putting a realistic strategy in place can help you to achieve your home-buying goals and overcome obstacles. 

1. Build your credit history: Building a healthy credit profile is one of the most important things you can do when trying to purchase a home. You can help increase your score by paying down credit cards, paying recurring debts on time, and not making any major purchases while applying for a mortgage loan.

2. Save for a down payment: It can be difficult to save enough money for a home. However, there are solutions, such as opening a savings account that is dedicated just for your down payment savings, cutting back on unnecessary spending, finding ways to make additional income, or even asking a loved one for a loan or monetary gift.

3. Know your debt-to-income ratio (DTI): Your DTI is your monthly debts divided by your gross income. This ratio helps lenders to determine your ability to pay your mortgage. (They generally prefer to see a DTI of less than 43 percent.)

4. Use a cost-of-living calculator: Because costs can vary based on location, a cost-of-living calculator can help you to better assess what and where you can reasonably afford to purchase.

5. Research student loan forgiveness: If you have student loans, you may be eligible to qualify for the new Student Debt Relief Plan that was just signed into law by the federal government. Once this debt is removed, it can potentially help you save more money for a down payment and increase your credit score and chances of securing a mortgage.

6. Refinance student debt: If you hold non-governmental, private student loans and have a high interest rate, look into a loan refinancing program to lower your interest rate and reduce your monthly payment, increasing your cash flow.

7. Understand mortgage lending standards: Mortgage companies have implemented stricter lending standards since the real estate market crash of 2007.  So shop around to see which lender has the criteria that best suits your financial needs as you begin your home search.

If you are a buyer who has bowed out of the market due to high pricing, limited inventory, and bidding wars, Jessica Lautz, vice president for demographics and behavioral insights for NAR, suggests that for the third quarter of 2022, buyers may not need to sideline their home buying purchase. Although it’s still a seller’s market, there has been a recent dip in activity, competition has lessened, and the bidding wars of the past few years are not as commonplace. In fact, there has been a slowdown in existing-home sales with a 5.9 percent drop from June 2022 to July 2022—a 20 percent drop from one year ago—and a year-over-year decline in sales in all four major quadrants of the country.

As a homebuyer, it can be frustrating trying to find a home due to the current real estate climate. However, it is achievable by strategically implementing a well-thought-out plan. Establish a reasonable timeline, create a checklist of the things you need to do to stay on track, and, last but not least, work with a real estate agent who can help advise you through the process of purchasing your dream home.