Did you know housing is an area where many Americans overspend? It’s true. Experts recommend families only spend up to 30% of their income on housing, however almost every income bracket spends more than that. In fact, the US Bureau of Labor Statistics broke down the income brackets into 5 groups of 20%, and all of the groups except the highest bracket spent more than 30% of their income on housing in a 2018-2019 study.
That’s why it’s important to sit and figure out your financial situation before you look for a new home.
Understand Your Financial Situation
Before you start looking for a new home, it’s best to create a budget. Write out all of your expenses, including anything extra you spend money on every month, like manicures or streaming subscriptions.
Once you take the amount of money you make a month minus the total cost of bills you have, then you have leftover income that would go towards housing costs like rent. You want to make sure that this amount is below 30% of your income so it’s considered affordable housing.
If you don’t have enough money left over after you subtract your expenses from your income, that means you’re overextended financially and will need to look for ways to save money.
Pay Attention to Your Credit Score
Those who are looking to rent or buy should make sure their credit score is good. What that means exactly can change, so be sure to check into it before judging your own. Property managers are more likely to rent a home to someone with a good credit history, than to someone with a poor score. For those who are buying, their score can mean the difference between low and high interest rates, and even the ability to get a loan at all.
In short, maintaining good credit will open up a lot more options for both renters and buyers. Fortunately, it’s easy enough to check your credit. Everyone with a Social Security number can check their score once a year by visiting AnnualCreditReport.com and requesting a report.
If they know they need to work on it, there are apps like Credit Karma that give users tips on how to bring their scores up.
Ask Important Questions
People should also make sure they have their housing goals in mind and are realistic about what they need. For instance, do they need five bedrooms or are three workable? Is there a specific neighborhood they need to be in for their children to continue at their current schools? How far away can they live from work?
Knowing the answers to those questions will make it easier to find affordable housing.
What Programs Are Available?
For those who are financially struggling, there are numerous affordable housing programs to help out. Here are some of the options available to people.
- HUD housing: The Department of Housing and Urban Development provides low-income housing in cities across the US. A housing agency will determine eligibility based on a number of factors, including income and citizenship.
- Section 8 housing: Section 8 is a voucher program where the government covers a portion of a person’s rent. Like public housing, there are eligibility requirements. They will only be able to use your voucher with landlords and housing options that accept them.
- Non-profit housing: This is a type of housing program specifically designed for qualifying senior citizens, and/or low-income households and run by non-profit organizations.
- Homebuyer assistance programs: There are federal and state programs to assist people in buying a home. If someone is interested in buying a home, they should check with their state to see what’s available. Scheduling an appointment with a housing counselor would also be a good idea.
Finding affordable housing and making sure your finances are in the best shape to do so can be a pain, but it’s worth it. Luckily, there are plenty of programs to help you get started and find your forever or for now home!