How Aspiring Homebuyers Can Build Financial Confidence in the Current Climate

Confident male real estate agent gestures toward a beautiful view out the window of a new home.
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It’s a nerve-wracking time to be a prospective homebuyer — especially if it’s your first time buying a home. A combination of instability in the job market and soaring home prices have put these buyers on shaky ground, rattling their confidence in their ability to buy. A recent survey of first-time homebuyers conducted by Chase found that only 1 in 4 first-time homebuyers said they had strong confidence that they would be financially ready to purchase a home in the first half of 2021.

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If you’re in the majority of prospective homeowners that don’t feel financially confident, it’s time to start taking the steps to improve your money outlook so that you can buy your dream home. Here’s what you can do to build up your financial confidence.

Reevaluate Your Current Lifestyle

The Chase survey found that 7 of 10 first-time homebuyers made lifestyle changes in order to work toward homebuying success.

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“We found that consumers are very active in how they’re making changes,” said Sean Grzebin, head of consumer originations for Chase Home Lending. “Respondents shared that the top three financial actions taken towards buying a home are lifestyle adjustments (such as reducing non-essential expenditures), establishing monthly budgets to help curb unnecessary spending and [making] efforts to improve [their] credit score, including monitoring debt and credit fluctuations.”

Create a Monthly Budget — and Stick to It

The survey found that 66% of prospective first-time homebuyers have created a monthly budget.

“Creating and sticking to monthly budgets prior to making the purchase will help prepare buyers for the reality of homeownership,” Grzebin said. “For first-time homebuyers especially, the transition to becoming a homeowner can be more expensive than they realize — closing costs, unexpected fees, small repairs, etc. Along with the mortgage payments, homeowners are also responsible for maintaining the property.”

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Start including your potential monthly mortgage payment into your budget — and for now, put this into your savings.

“Prospective buyers should ‘practice their payment’ to prepare themselves for what it will be like to have a mortgage,” Grzebin said. “This can help get them financially and mentally prepared for the investment. To make it easier, you can even automate your savings.”

Look Into Down Payment Assistance Programs

You may qualify for down payment assistance programs that can help lighten the financial load you will need to take on, making you feel more confident in your ability to afford a home. The Chase survey found that more than half of respondents planned to research down payment assistance programs this year and that 33% have already done so in 2021.

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“Many people may be considering down payment assistance options, and thankfully there are many down payment assistance programs available for buyers,” Grzebin said.

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Figure Out How Much You Really Need for a Down Payment

“Not all mortgage loans require the same down payment,” Grzebin said. “Some lenders might require up to a 20% down payment, while others require as little as 3% of the home’s purchase price based on the loan type. While a 20% down payment has its benefits (it could help you avoid paying private mortgage insurance), many buyers may not be able to put down that much upfront.”

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Whether you can put down 20% or you can only afford to put down 3%, figure out what type of loan will work best for you — then you can figure out how much you actually need to save for a down payment.

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“When exploring what loan options will work best for you, it’s mainly dependent on your financial profile, such as your income, credit history and score, employment and financial goals,” Grzebin said. “A qualified home lending advisor can help you understand what options are best for your unique situation. Prospective buyers can also leverage tools like an affordability calculator to help them understand how much they can afford.”

Have Money Saved for Closing Costs

“Aside from the down payment, prospective buyers should also ensure they have enough funds reserved to cover closing costs, which can amount to up to 3% or more of the final purchase price of a home,” Grzebin said. “While there is no way for a buyer to completely avoid paying these fees, there are ways that homeowners can save on them. Prospective buyers should explore what assistance programs they may be eligible for to help cover closing costs and down payments.”

In Today’s Market, Preparation Is Key

Taking the above steps will not only help you to feel more financially confident, but they will also help you become a more attractive buyer in today’s competitive market when bidding wars are common.

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“Now is the time to ensure you have everything in order so that when an offer is accepted, you’re ready to move forward,” Grzebin said. “Prospective buyers should work with a home lending advisor and real estate agent to ensure they get pre-qualified for a loan, understand what they can afford and are knowledgeable about the market in order to provide a competitive, yet reasonable offer based on the property and the market.”

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About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and People.com. Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert. 

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