Preparing To Shop for Houses
Before signing up for that online house-hunting tool, contemplate how you spend your time at home currently, how long you plan to stay in your new home, and any changes you foresee during that upcoming period. Will this be a starter home or a forever home? Homeowners tend to live in their homes for six to 18 years in the U.S.’s 100 largest metro areas. Typically, homeowners live in their homes for shorter periods in fast-growing areas. You’ll likely need to compromise on some must-have items to stay within a budget, so it’s essential to consider your top priorities and what you refuse to negotiate on. For example, your child might need to stay within a particular school district. Or you could require a certain number of bedrooms in a single-family home for the children you’re planning on having. But perhaps you can make do without a patio for entertaining friends, at least upon move-in. After determining your priorities, you can set search parameters with an online house-search tool and ensure that the house you want is one you can afford. You may need to tweak your search if houses regularly sell for more than the list price or if you discover some of your priorities (such as a particular neighborhood or brand-new home) don’t fit your budget. Avoid considering homes you can’t afford or homes too small or too large for your changing needs, and carefully weigh a home you might find difficult to resell in the future or buying in an unknown neighborhood.
Location, Location, Location
Many homebuyers want a good school district, safe surroundings, pleasant climate, and an easy commute to work—and are willing to pay for those perks. Across the U.S., since 2020, buyers have been competing for suburban properties in addition to urban properties. Even outer suburbs or “exurbs” have seen growth in the past few years and will likely appeal to would-be homeowners seeking affordable housing for years to come. According to real estate site Zillow, desirable features of location include:
Closeness to urban core and transitLow-traffic locationNear parks and green spacesWalkable with sidewalksWater or mountain views or waterfront location
If one or several of these elements don’t matter as much to you, you may be able to find an affordable home that isn’t as competitive as others on the market. Realtor.com has found that less-desirable location features that could reduce a home’s price include:
Noise from nearby airports, highways, and railway tracksWithin 0.1 mile of a school, fire station, or 24-hour grocery storeWithin a half-mile of a busy church or a hospital emergency roomNear a shooting range, strip club, power plant, funeral home, homeless shelter, or cemeteryHigh renter concentrationBad school
If you don’t plan to have children or are retiring, you may not care about the “bad school.” If you’re not bothered by noise, busy locations, or strip clubs, you may find a good deal. In addition, buying the “worst house on the best block” is a time-honored way to buy a home in an otherwise unaffordable neighborhood and face decreased competition. On the other hand, some say buying a bigger house in an up-and-coming neighborhood may be a better long-term investment with faster equity-building potential.
Choosing the Right Property Type
Overall, single-family homes are typically among the more expensive options. You may need to investigate cheaper alternatives if location or another priority is more important to you, including condos, manufactured homes, or an older single-family home that needs serious repairs.
Single-family homes: Single-family homes are the more costly option, but they appreciate faster and have a greater diversity of types and locations, whether a new, custom-built home in the suburbs or an older home closer to the city center. According to a recent NAR survey, many homebuyers consider previously owned homes to be a better overall value. Condominiums and co-ops: These smaller, apartment-like dwellings can be an affordable housing option, particularly for first-time homebuyers. There are differences between co-ops and condos, but both may come with extra fees, homeowners association dues, or additional costs to cover unexpected expenses or repairs. Townhouses: Townhouses are multilevel structures grouped together that often share one or more walls and may or may not come with monthly homeowners dues. While less expensive than single-family homes, townhouses may also have rules restricting interior changes. Manufactured homes: Manufactured homes are usually prefabricated elsewhere, then taken to the site. They may be less expensive but also tend to depreciate over time. Multifamily homes: Duplexes or small apartment buildings offer a homebuyer the option of living in a part of the space while renting out the other side or area. Tenants will provide you with another form of income, but you’ll have more responsibilities (and potentially, expenses) as a landlord.
What Size Home Can You Afford?
Consider balancing size with savings. Don’t give up your savings plan for a big house, as you’ll still need an emergency fund for unplanned repairs and replacements. But you’ll want to ensure the home’s layout suits your needs, both now and later. While children can share rooms or bathrooms for a while, it’s important to consider how long you plan to stay in the house. If you’re hoping to stay for at least 10 years, ensure there’s enough room for everyone as they grow. Consider how flexible existing rooms are—can you repurpose a bedroom for an at-home office, for example, if you change jobs? Storage space in closets, garages, and other areas is recommended to be 10% to 25% of your home’s total floor space. If you have a 1,500-square-foot home, that’s 150 to 375 square feet. But don’t forget that the larger the house, the more utility and maintenance expenses you may rack up, particularly if systems haven’t been updated recently. Smaller homes can save you money on energy and maintenance.
Interior and Exterior Features
A home’s features and amenities may impact sales pricing and competition. A newly renovated home with an outdoor kitchen and updated bathroom may go for top dollar amid many offers. Meanwhile, the bungalow across the street with a shag-carpeted bathroom could be a steal, even in a desirable neighborhood. Go against the grain to find a good deal. Features that turn off some buyers, potentially leaving the home open to lower offers or less competition overall, can include:
Ugly or bold paint color versus white or neutral wallsCarpeted rooms versus refinished hardwood floorsWhite or black appliances versus stainless steelDated bathroom and kitchen versus updated versions
According to agents surveyed, many buyers are also turned off by features that signal a home’s age, such as carpeted bathrooms, popcorn ceilings, shag carpets, wood paneling, and outdated window treatments. Many home buyers seek outdoor space to entertain friends and family, so keep an eye out for properties with potential, but that currently lack a usable patio, pool, fire pit, or outdoor pizza oven. If a home still has an oil-based furnace, for instance, it may be less expensive right now but eventually could cost more to heat, and you’ll have to pay to convert to another heat source.
Home Condition and Expected Repairs
Fixer-uppers can be one way to save money. A true fixer-upper usually presents a bargain asking price from a seller who’s happy to make concessions—but it may also not be a livable property until renovations are completed. Carefully and honestly consider your ability to put in “sweat equity” or the amount of money you’d need to invest in any repairs and renovations. Hopefully, a home inspection will reveal any serious, high-cost system or structural defects, such as a cracked foundation, shifting soil, bad wiring, broken sewer pipes, or flooding. The home’s roofing and siding should be examined both for years left in them before replacement and overall maintenance cost and time. For example, wood panels or wood shake-shingle siding need regular painting or staining, while aluminum siding is virtually maintenance-free. Some building materials, such as lead and asbestos in older homes, are health hazards and can lead to expensive future remediation. Other environmental hazards such as radon, formaldehyde, mold, and insects can also lead to costly issues. According to the real estate site Zillow, 81% of sellers make a concession during the home-sale process. Concessions could lower your final purchase price and make the house more affordable. Seller concessions often include lowering the sale price, including existing appliances, paying some or all closing costs, and providing a repair allowance.
Additional Options for Finding Affordable Homes
In addition to scouting the standard housing market for affordable homes, you may want to look to alternative housing markets or through resources that focus specifically on affordable housing.
Foreclosures
If a homeowner can’t pay their mortgage and falls into default, their bank or lender can reclaim the home and put it on the market as a foreclosure. Foreclosure properties are sold at auction and are listed publicly through city, county, or state agencies, depending on your location. An agent who specializes in foreclosures can help guide you through the purchase process and help you avoid problems. You can often get good deals on foreclosed homes because the bank is trying to recover unpaid funds, and likely in a hurry. While a foreclosed home might be less expensive, it can also require extensive repairs or present challenges when price negotiations occur.
Short Sales
A short sale occurs when a homeowner is having trouble making payments and sells the home for less than they owe on it before the bank can foreclose. You can find good deals with short sale homes, but the buying process can be tricky. For one, you’re dealing with the bank that has a lien on the property and the owner who may be selling reluctantly. Short sale homes also can be harder to find than foreclosures, so you may want to work with an agent who specializes in this type of property.
Government Programs
The U.S. Department of Housing and Development (HUD) offers a number of programs aimed at providing affordable housing. HUD buys foreclosed properties and also works in tandem with the Federal Housing Authority (FHA) to provide more financing options. The Dollar Home program, for instance, works with local governments to subsidize $1 housing for low-income families. HUD’s listing of homes for sale includes single-family and multi-family homes, as well as specific resources to find foreclosed homes on auction from the IRS, the VA, the FDIC, and other federal departments.
The Bottom Line
It is possible to find an affordable home that fits your budget, but you may need to possess (or develop) patience, flexibility, and an open mind about your location, the house’s features and amenities, and how much work you’ll have to put into your new, affordable home.
