Everybody needs to live somewhere, and preferably in their own home. This generally leaves two options: renting or owning a home. There are pros and cons to each possibility, but only homeownership builds a financial portfolio. That’s because equity incrementally builds with every mortgage payment. Rentals, while convenient, are not conducive to wealth generation. Tenants have no ownership or investment in a rental property, aside from the security deposit and any liability-related issues. Mortgages are synonymous with title deeds, and that means something.
Many individuals and families who want to own their own home are uncertain about how best to do so. There are seemingly endless numbers of realtors, banks, credit bureaus, and lenders eager to work with aspiring homeowners. It’s an information-dense arena, and that routinely spells trouble for first-time buyers. The economic climate is not exactly buyer-friendly at this point in time. While progress has certainly been made since the post-pandemic inflation spike, prices have stabilized at much higher levels, reducing disposable income.
The average house price has spiked since 2022, leading to widespread unaffordability, limited supply, and excess demand. Interest rates have come down from the 7% – 8% range and are now sitting in the mid-6% band heading into 2026. This is good news for buyers and sellers because it makes the market more competitive.
At very high rates of interest, sellers are reluctant to list their properties because they’ll have to purchase their next home at those same high rates. This results in tight inventory and limited supply. With the Federal Reserve cutting its benchmark rate by a further 25 basis points in December, more liquidity is expected in the broader economy and the property market. This is good news for buyers and sellers because it makes the market more competitive.
How are Buyers capitalizing on the Current Economic Climate?
The process of acquiring a new home is a multi-stage undertaking. Everyone is required to submit paperwork, including income tax returns, employment history, credit scores, identity documents, driver’s license, and often a down payment. That’s generally what is expected, but it doesn’t hold true for everyone. Certain buyers have it a lot easier because they have been recognized for their service. Military personnel, service members, and eligible family members can apply for a NewDay USA home loan for a competitively priced loan with no down payment needed.
It’s no coincidence that top-tier lenders are willing to write loans to veterans; the Department of Veterans Affairs partially guarantees VA loans. The numbers speak volumes. Many veterans use their VA loan benefits to purchase their primary residence. Reduced focus on credit scores and work history, coupled with no need for a down payment, makes it much easier for veterans to move through the process. Consider the following VA loan statistics as provided by ConsumerAffairs from VA loan data:
● Texas led the nation with VA loan recipients in 2023
● VA mortgage rates have consistently beaten average mortgage rates since 2019.
● In 2022, VA loans comprised 10.2% of all purchase loans for owner-occupied real estate.
● States with the most VA loan recipients in 2023 included Texas, Florida, Georgia, North Carolina, Virginia, and California
Source: Consumer Affairs VA Loans
Ordinary citizens – non-veterans – are also capitalizing on current market conditions in a number of innovative ways. The main determinants of eligibility for home ownership include the following:
● Up-to-date paperwork and/or a cosigner to qualify for a mortgage
● Stable employment history and a demonstrated ability to make payments
● A satisfactory credit score is required to get the best possible interest rate and terms
● Pay a down payment to avoid PMI – under 20% down payments require PMI
The biggest challenge for individuals wanting to purchase their own home is the down payment. These are often substantial, especially since Zillow’s listed median house value is $360,000. 20% of that is already $72,000, and the vast majority of first-time homeowners do not have that kind of money lying around. That means a smaller down payment is possible, which comes with higher fees. Ideally, applicants want to save up for the down payment to reduce overall costs over the term of the loan.
Work and Credit History
A stable work history is sacrosanct. If the buyer can demonstrate the ability to make mortgage payments, the approval process is much smoother. Expense-to-income ratios should also fall within the right range to ensure the buyer is not committing to an expensive mortgage. Credit scores can help buyers who are shopping around for the best interest rates on their mortgages.
High credit scores (720+) typically qualify for better interest rates on mortgages. It’s always best to boost a credit score before applying for a mortgage. 30-year loans for $360,000 properties cost substantially more over their lifespan. Each percentage point reduces the repayment burden over the loan term. There are many innovative ways to improve credit scores, such as making repayments on time, having a diversified portfolio of credit lines (personal loans, credit cards, student loans, store credit cards, etc.), all in good standing.
Only deal with reliable lenders. Many unscrupulous lenders are willing to advance lines of credit to buyers. It’s best to stick with high-profile realtors and their trusted lenders when considering applying for a mortgage to purchase your own home. At times, when supply exceeds demand in the housing market, buyers can score incredible deals. When the competition to sell to a limited number of buyers is intense, deep discounts can be expected.
There is no substitute for research. It’s better to be a well-informed buyer than an impressionable buyer. Take the time to research the housing market, financing options, and all the choices available to you. Sometimes it’s preferable to opt for 15, 20, or 30-year loans, depending on how much debt you’re willing to take on every month. Short-term loans have higher premiums and rapid equity buildup, while long-term loans have lower premiums and slower equity buildup.
At the end of the day, every buyer has to look in the mirror and decide what works best for their needs. A home should be a sanctuary away from the madness of the world, not a financial trap that is impossible to maintain. Affordability, comfort, safety, and utility value are equally important. Experts advise that buyers should explore all options based on personal circumstances to make the right choice.
