If it feels impossible to afford a house, it’s not your imagination.
Home prices have increased steadily since the Great Recession, and expenses like student loans and rent make saving difficult. Almost half of renter households spent more than a third of their pretax incomes on housing in 2016, according to the Joint Center for Housing Studies of Harvard University.
» MORE: How much house can you afford?
But homeownership isn’t out of reach, especially if you’re a first-time buyer. Follow these steps:
Decide on a homebuying timeline
Whether you can afford a home often depends on how prepared you are to make an appropriately sized down payment.
Typical down payments among first-time buyers tend to be much less than the traditional 20% — and most often 6% or less, according to the National Association of Realtors.
Even so, a traditional 20% down payment is one of the biggest hurdles to overcome if you’re angling to live in a competitive market, where mortgage lenders look for more money down as an indication that you’re an attractive buyer. To settle in an expensive area, you may have to save diligently and wait longer to buy.
Typical down payments among first-time buyers tend to be much less than the traditional 20%.
Sock away a portion of your annual bonus from work, or increase the amount you save whenever you get a raise or quit subscription services you don’t use. Set up an automatic transfer into a savings account designated for your down payment so it grows without much effort.
If you want to buy a house sooner, especially in a less competitive area, there are ways to put less down.
Look into first-time home buyer programs
Many states and local governments offer first-time home buyer programs that can provide down payment and closing cost assistance, low interest rates and more.
Government-sponsored companies Fannie Mae and Freddie Mac will also let you make a down payment of just 3% of the home’s price, and the Federal Housing Administration backs mortgages that require down payments of 3.5%.
Weigh the trade-offs of a smaller down payment, like mortgage insurance.
Local housing counseling agencies can tell you what programs you qualify for and whether down payment assistance is available in your area.
You’ll need to weigh the trade-offs of a smaller down payment. You’ll pay mortgage insurance for the life of the loan on an FHA loan, for instance, which increases your monthly mortgage payment.
Save more per month — not only for your down payment, but also for closing costs and a replenished emergency fund — by cutting back on big expenses. That could mean living in leaner digs during the years when you’re saving for a home, perhaps with roommates or family members, or waiting to upgrade your car.
You can also refinance student loans to get a lower interest rate or even a reduced monthly student loan payment. While that may add a line of credit to your credit report, and potentially extend your repayment term, you’ll have more flexibility to save for a home.
Choose the right home, in the right place
Have your long-awaited housewarming party sooner — without stretching your budget to its limit — by choosing to buy in a region known for its affordability. A cost of living calculator can help you explore your options.
Lower prices mean lower down payments and a mortgage that won’t take a huge chunk of your income. Living in a lower-cost area isn’t the right choice for everyone, but it’s an option if you’re ready to put down roots quicker than a higher-priced city will allow.
No matter where you choose to live, make sure you’re searching for homes you can afford. Use a calculator to determine how much house you can afford based on the location, your income, your likely down payment and other factors.