Did you know that construction on 1.60M new privately owned houses began in the U.S. last year?
New home sales have been up recently, and with interest rate hikes potentially slowing down, new houses are becoming an intriguing option.
If this goal has been on your mind, you’ve probably been wondering how to afford it. Keep reading for tips on how to make your dream home a reality.
Should You Try to Save Money and Spend Less?
Most well meaning people will tell you that saving money for a home requires sacrifice, dedication, and commitment. They’ll say you need to create a budget and be strict in sticking to it.
The problem with this logic is that the average home price in the U.S. is now priced at an astounding $348,079. Hawaii is the most expensive state to buy a house in, with an average home price of $959, 134. In contrast, the state of West Virginia is the most affordable, with an average home price of $126,891.
To make things even harder, the average U.S. home climbed by almost one-third (29%) since the COVID-19 pandemic began in 2020.
Plus, new construction homes are more expensive than prebuilt homes and that spread is growing with the rising cost of building materials.
Thus, it’s going to be really hard to penny pinch your way to your dream home. Given this, most people will have to increase their income to be able to afford their dream home, not drop their expenses.
After all, your gross income is the first first metric a mortgage lender will look at. Unless your gross income qualifies you for further analysis, a mortgage lender won’t even move onto looking into your expenses, like housing, vehicles, and debt.
1. Increase Your Income with “Skill Stacking”
To begin, one of the easiest ways to increase your income is to increase your skills. Personally, my favorite way to do this is through an approach called “skill stacking”.
Skill stacking is the art of combining several normal skills to create a unique combination of abilities that are extraordinarily valuable.
Much like a piece of real estate that gets more valuable with each floor that you add, skills are identical. Your earning potential increases each time you stack a new skillset on top of your existing capabilities.
As an example, let’s consider a graphic designer who just graduated from college. Right now, there are graphic designers graduating all over the world, so they are not in scarce supply. It is also possible to hire graphic designers in other countries through websites like Upwork.com for only a few dollars per design.
So, how would an American-based graphic designer command high pay money, when the supply for their skill set is not scarce, nor in high demand relative to the number of people who have it?
The answer is that a person like this would needs to stack other skills on top of their design skills.
First, I’d recommend that this person buy a paid course to learn social media skills. By growing a large social media audience, the designer could get their work in front of large number of people. Next, I’d recommend that this person study sales skills by reading books, buying courses, or watching free YouTube videos. With sales skills, this person could offer their design services to people or businesses at a much high price point.
Third, I’d recommend that this person learn about designing to drive sales conversions, so they could charge higher rates and ask for profit-sharing as part of their compensation package. Finally, I’d recommend that this person study buyer psychology—meaning, the triggers that influence people to buy. If you want to acquire this skill, go read the book Influence.
If a designer knew how to attract a lot of attention through social media, sell their services effectively, design for sales conversions, and influence people to buy, they would be more valuable in the marketplace than their peers. Wouldn’t you agree?
In short, skill stacking is about combining normal skills into an extraordinarily valuable combination of skills that few people have.
It’s easy to do if you map out a route and start stacking one skill after another on top of each other.
2. Establish Multiple Flows of Income
To secure money for your dream home, the next smart move is to pursue multiple streams of income, such as working multiple jobs, selling unwanted household items online, renting out a room, taking on freelance jobs, or creating a side business.
With multiple income streams, you can save up the necessary funds to purchase your desired home and make it a reality.
Get creative about how to make money. For example, if you don’t have a room to rent out, you can rent out physical storage space or vehicle storage space using the website Neighbor.com. Both are great options!
You can also rent out your car on sites like Turo.com or pick up extra work on Upwork.com.
You can learn more ways to create income streams by reading this article I wrote, titled “How to Effortlessly Create Multiple Flows of Income in 2023.”
3. Reduce or Eliminate Your Other Debt Obligations
Finally, by paying off credit card debt and eliminating other loans and debts, you can free up more of your income to put a down payment on the home.
Paying off other debt will also make you more attractive to lenders when you apply for a mortgage, making it easier to qualify for a loan.
Plus, it can reduce the interest rate you are offered and make the entire process simpler to manage.
Taking control of your existing debt can help clear a path for affording your dream home.
Wrapping Up: Steps to Affording Your Dream Home
Before you begin the home search, take a look at your income, credit score, and savings. Determine the maximum amount you can pay toward a mortgage.
Once you know your budget, create a list of must-haves and wants to help you compare homes. It is important to view the condition of the home, as well as its vicinity to schools, libraries, and shopping centers.
Make sure to find out the cost of utilities and homeowner’s insurance. Talk to other people to find out the pros and cons of different neighborhoods. Research the home history and make sure to get a home inspection.
Moving into your dream home is within reach. If you increase your income, assess your credit score, and leverage potential opportunities like investors or first-time homebuyer programs, you’ll be on track to afford your dream home.
Now, start saving and researching your options—it could be closer than you think!
For more real estate advice and to find homes for sale, explore the real estate section of this site.