Did you grow up thinking buying a home was the ultimate goal because your parents told you it was a good investment?
Not so fast. There’s more to finding your dream home than considering its value as an investment, because the reality is, even if the value of your home increases, there’s no guarantee you’ll make a profit. Why not? For starters, home owners pay a tremendous amount of taxes and fees on top of their mortgage.
There are still plenty of perks when it comes to homeownership, but traditional homeownership isn’t the only way to get what you want out of your living situation. There are several different living situations worth checking out.
Is a Traditional Home Right for You?
Just 34 percent of people under 35 own a home—a record low. But low millennial home ownership isn’t necessarily a result of the rise in student loan debt. Alternative housing solutions —tiny-house living, RVs, and lease-to-own home loans, for example—have proven there isn’t just one right way to live. And plenty of people are also living internationally, where their U.S. dollars go further.
Buying home in the ‘burbs may still be the dream for some, but it’s also becoming commonplace to pursue alternative housing.
Which Living Situation is Best for Your Budget and Lifestyle?
Not sure which living situation is the best for your budget? Take this quick quiz to see what your personality reveals about your dream home.
1. What does your ideal weekend look like?
A. Relaxing at home, working on house projects, or catching up on reading.
B. Enjoying the city life. I love to shop, dine, and party.
C. Going on a new adventure; exploring a new city or mountain top.
2. What do you think of your current location?
A. Love it! I want to raise my family here.
B. It works for my current season of life, but I don’t know if I want to live here forever.
C. Hate it! Get me out of here.
3. What is your current job situation?
A. I want to stay with and move up in my company.
B. I plan on moving to a different company or position within a year or two.
C. I work remotely and can work wherever I want.
4. What are your priorities for the next decade?
A. Find the right spouse and start a family.
B. Scale your company or become a successful entrepreneur.
C. Travel the world and experience different cultures.
Find out what your answers say about your ideal living situation.
MOSTLY As: HOMEOWNERSHIP IS FOR YOU
You are at the point in your life where you are ready to settle down in one place for the foreseeable future. For many, purchasing a move-in ready home is appealing, but there are other options to explore.
For instance, if you have the time and skills, consider buying fixer-upper for a steal and renovate it yourself. You will not only save money, but can also craft your home exactly as you want it.
MOSTLY Bs: CONSIDER FLEXIBLE HOUSING
If you aren’t in your dream job or dream location, there’s no need to settle down. There are several living solutions that can fit your budget. Renting an apartment, home, or condo remains a popular choice, but the idea of communal living and co-housing are also sparking interest in some cities. Individuals can get that community feeling they crave with practical amenities for a reasonable rate.
Also, many prefer city life to settling down in the suburbs, so renting or co-housing can end up being a more affordable option than purchasing.
MOSTLY Cs: ALTERNATIVE HOUSING MIGHT BE A PERFECT FIT
Tiny house living, RV living, and overseas living are sought after more than ever. These options are ideal if you’re not ready to settle in one location but would rather see the world.
Tiny house living is appealing on many fronts. It’s affordable. The average tiny home costs between $15,000 and $65,000. Santander Bank offers personal loans between $5,000 and $35,000. While individuals might not get the full cost of a tiny house covered through a personal loan, getting a smaller personal loan can make other debt and living expenses easier to manage. These houses are also easier to maintain, they reduce your impact on the environment, and they can move with you.
Another option is the expat life, living and working in a new country. This is a common choice among entrepreneurs and individuals who work remotely. Many call another country their home to find better job opportunities and work-life balance.
How to Afford Your Dream Home
Once you find the perfect home for your lifestyle, it’s time to figure out if you’re ready to buy a house.
Many lenders are becoming more flexible to accommodate rent-to-own loans and tiny home financing, but there are a few things you, as a prospective homeowner, should do to afford the place of your dreams.
- Tackle Debt: Even if you have 10 years to pay off your student loan debt, try not to take that long if you can help it. The less debt you have, the less of a risk you’ll likely be to lenders. It’s important to keep in mind that excess debt can make it hard to balance a mortgage payment on top of other payments, like student loans. Consider refinancing student loans, personal loans, and auto loans to secure a better overall rate. This can help you pay off your debt faster and save thousands over the lifetime of the loan.
- Make Financial Goals: It’s one thing to say that you want to buy a home or save $20,000, it’s another to have a concrete financial plan. Reverse engineer your goals to figure out exactly what you need to do. For example, if you want to save $20,000 in two years, then you need to save about $834 each month. This means you either need to earn more each month or cut your expenses by $834.
- Watch Your Credit Score: Your credit score is crucial for not only getting approval for a home loan, but also for securing a low APR. Order a free copy of your credit report through AnnualCreditReport.com. Check for any mistakes or issues that need to be fixed. Then sign up for a free credit monitoring service, such as Credit Sesame or Credit Karma, which can help you determine what’s bringing your score down (i.e., too much debt or too many credit inquiries) and track your credit score improvement.
By focusing on your debt, financial goals, and credit score, you will set yourself up to afford the home you want, whether it’s a tiny home in Kentucky, a condo in Los Angeles, or rented pads around the globe.
Before you look into home loans, consider what matters most to you. Do you prefer to have a garden or a roommate? Finding the ideal living solution is not just about what fits into your budget, but also supports the life you want to live.