Myth-busting facts about the homebuying process could help you achieve the goal of homeownership. (iStock)
Americans still believe in homeownership, but high home prices, soaring borrowing rates and misconceptions about the homebuying process keep many from achieving their goal, a recent survey said.
The majority of Americans (83%) consider homeownership an essential life milestone and 40% think about it at least once a week, according to the KB Home survey. Moreover, 58% are prepared to spend less on non-essentials to save for a downpayment and 45% would even consider a side hustle to earn extra income to achieve their goal.
Nearly 50% of Americans want a home for privacy reasons, while 44% said they considered buying a home a good long-term investment and 33% said they wanted it as a place to make memories.
Despite the overall importance of homeownership, 56% of respondents believed they were in a worse position to buy a home than prior generations. High mortgage rates and high home prices have challenged homeowners' affordability today. Additionally, a dearth of affordable housing has further obscured housing for many.
Homebuyers can find the best mortgage rate by shopping around and comparing your options. You can visit an online marketplace like Credible to compare rates, choose your loan term with multiple lenders at once.
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Housing myths that may be keeping you from owning a home
Although mortgage rates are high, 54% of survey respondents incorrectly believed that they were at an all-time high – in 1981, the 30-year mortgage rate peaked at 18.6%.
In addition, only 33% of respondents were familiar with key facts about financing a home, including that a minimum down payment of 20% is not required or that buyers can qualify for a mortgage with a credit score in the 500s. Moreover, only around half correctly identified the meaning of terms such as "APR" (56%) or "PMI" (54%); of this group, Gen Zers and Millennials are less likely to be familiar.
"A majority of Americans have a poor understanding of many aspects of homebuying," KB Home said.
If you are ready to shop for the best rate on a new mortgage, consider visiting an online marketplace like Credible to compare rates with multiple lenders, all in one place.
How to save money to buy a home
Seventy-one percent of Americans said they are waiting on rate cuts before entering the market, according to a BMO Financial survey. Americans will likely have to hold out through another summer for potential relief.
Since July, the Federal Reserve has maintained the federal funds rate range at 5.25% to 5.5%. Fed officials have said they anticipate rate cuts for 2024 but need more confidence that inflation is heading toward the 2% target rate.
Waiting for a drop in borrowing costs would improve affordability, but shopping around for the best rate can also save buyers money. Other tips that homebuyers should consider to boost affordability include:
Boosting buying power by improving your credit
Buyers can save additional money on home financing by understanding and improving their credit profile. A Zillow analysis showed that borrowers with an "excellent" credit score – between 760 and 850 – could save up to $103,626 in mortgage interest payments over the life of a 30-year fixed-rate loan, based on a typical home priced at $354,165.
Researching down payment assistance programs
Researching down payment assistance programs can help defray closing costs. Freddie Mac is leading the initiative to streamline documentation to access its down payment assistance (DPA) programs, which will connect more lenders and homebuyers to this help.
If you're considering becoming a homeowner, it could help to shop around to find the best mortgage rate. Visit Credible to compare options from different lenders and choose the one with the best rate for you.
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