With fewer new homes being built, it’s more competitive to buy a home. First-time homebuyers have to compete with all homebuyers, including investment companies that can make all-cash, no-contingency offers. These firms are buying single-family homes at scale and turning them into rental properties. These factors may fuel real estate bidding wars among homebuyers.
You can look into a shorter-than-30-year home loan when choosing mortgage terms, which can mean a lower interest rate. For example, the average rate on a 30-year fixed-rate mortgage stood at 5.27% in the first week of May 2022 compared with 4.52% for a 15-year fixed-rate mortgage, according to Freddie Mac data.
If your dream home seems out of reach, you can explore more affordable neighborhoods or look for smaller homes on the market. By downsizing your home ambitions, the smaller amount you need to borrow may mean monthly mortgage payments that are more in line with your budget.
Your debt-to-income ratio or DTI measures your ability to afford new debt without defaulting on your existing obligations. Most lenders like to see a DTI below 36%, and refinancing your existing debts can help improve your DTI in some cases.