Can I afford to buy a house?

Buying a home can feel out of reach for many. But if you're an aspiring homeowner, there are ways to make it a reality. In this episode, mortgage reporter Molly Grace explains how to know if you're financially ready, what costs to budget for and how to find a home that works for you. Learn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  This message comes from Midi Health. Most women never get real answers about their hormonal health. Midi is changing that with virtual care covered by most major insurances. Understand your hormones. Visit joinmidi.com to book your first visit today.

• 0:16Marielle Segarra?

  You're listening to Life Kit from NPR.

• 0:24Marielle Segarra?

  Hey, everybody. It's Marielle. When I was a kid, I used to play the board game Life a lot. And one of my favorite parts was seeing what house I was going to get. Would it be a cute country cottage with a large yard and a garden? Or a grand Victorian with a library and a marble fireplace and a wraparound porch? Of course, sometimes life didn't work out that way. And I couldn't afford a house at all. Sound familiar? Yeah, the game's a little less fun when you're older and this is your actual life. For a lot of us, buying a house feels out of reach. I've heard some of my friends instantly dismiss the idea of like, I will never be able to afford that, at least not where I live. Well, Molly Grace is a mortgage reporter for Business Insider.

• 1:09Marielle Segarra?

  She's been writing specifically about mortgages for seven years.

• 1:12Speaker 02

  I would definitely not just say, you know, right out of hand, I can't afford to buy a house. You might be able to, especially if you have a little bit of money saved up. And if you qualify for a low down payment mortgage, maybe even with some down payment assistance, it definitely could be a possibility for you.

• 1:27Marielle Segarra?

  Now, I should say, homeownership is not right for everybody. It depends on your circumstances and where you live.

• 1:33Speaker 02

  And I don't think everybody should necessarily just buy a home just because that's what the conventional wisdom tells you to do. You know, does it fit in with your lifestyle? Do you plan to stay in the same place for about five years or more? You're putting in a huge investment when you buy a home. So you want to make sure that it actually suits you and it's not just something you're doing because you feel like you should do it.

• 1:52Marielle Segarra?

  On this episode of Life Kit, I talked to Molly about how to know whether you can afford a house, the process of figuring that out, finding a real estate agent and a lender, and choosing a place you can see yourself calling home.

• 2:08Speaker 03

  Stay tuned for the following announcements and messages from our sponsors.

• 2:12Speaker 00

  This message comes from Subaru. Discover the 2027 Subaru Crosstrek Hybrid. With up to 630 miles per tank, this Subaru Crosstrek Hybrid delivers up to 50% better city MPG along with increased horsepower. With standard symmetrical all wheel drive and 8.7 inches of ground clearance. Equipped with a standard 11.6 inch multimedia navigation system touchscreen, it keeps your trip on track. Their most fuel efficient, lowest emission Subaru Crosstrek. Adventure on the edge.

• 2:42Speaker 03

  This message comes from Granger. This is the story of the one. As a procurement manager for a hospital system, she keeps every facility in her network stocked and ready. That's why she counts on Granger to be her single source for thousands of products, from disinfectants to lighting, air filters, and more. And with fast, dependable delivery, Granger helps her keep every facility stocked, safe, and running smoothly. Call 1-800-GRANGER, click Granger.com, or just stop by. Granger, for the ones who get it done.

• 3:15Speaker 00

  This message comes from Donors Choose. Right now, there's a student that needs something. Maybe it's books, art supplies, or a science kit that will unlock their learning potential. And you can be the reason they get it. With Donors Choose, you'll fund real classroom projects from real teachers, so your gift goes exactly where it's needed most. Because when students start with what they need, they're ready to build confidence, discover new ideas, and succeed all year long. Give what students need, right when they need it, at donorschoose.org-local.

• 3:49Marielle Segarra?

  Molly, what are the benefits of buying a home?

• 3:51Speaker 02

  One of the big benefits of buying a home is obviously the stability. When you're renting, your rent payment could go up every year, or you could end up having to move. And you're also benefiting from your home's value growing over time. So... You know, home values tend to rise over time, which means you'll get that money back in equity when you own the home. And you can tap into that and potentially use that money for other things, which is why people always say owning a home is really good for wealth building.

• 4:21Marielle Segarra?

  What would you say are the downsides or commitments that come with owning a home?

• 4:28Speaker 02

  Yeah, so when you own a house, you don't have a landlord to say, hey, my air conditioning is broken, or hey, you need to fix this. Like, everything is on you. And that's, you know, time out of your day fixing stuff. That's money out of your pocket. And it can potentially be a lot of money. If you don't want to stay in the home for very long, if you want the flexibility of being able to move around a lot, maybe for your job or just your lifestyle or whatever, you really need to stay in the home at least a few years to kind of recoup all the costs that come with it. Because there are a lot of upfront costs and ongoing costs that come with owning a home. So if you're not willing to stay in it for, you know, at least five years, they usually say, you can end up losing money.

• 5:14Marielle Segarra?

  All right, takeaway one. Ask yourself if your lifestyle fits with buying a home right now. Are you willing to own it for at least five years? Will you be able to make repairs and do maintenance on the place? Or pay someone if necessary? Are you looking for stability? You'll get more of that when you own a home than when you rent. Your monthly payment will be locked in unless you have an adjustable rate mortgage, and you can change the space without needing a landlord's approval. But maybe renting gives you the freedom you want right now, or you're not sure what neighborhood you'd want to buy property in. Be honest with yourself about where you're at. What do you need to know about your finances before you start this process?

• 5:54Speaker 02

  So I would take a look at your credit score, your debt.

• 6:00Speaker 02

  And your income. So your credit is gonna be a big factor here. Lenders want to make sure, you know, that you're not too much of a risk. Typically, you'll need to have a credit score of about 620, but it varies. And then you're also gonna need to have a manageable level of debt. So lenders will look at how much you earn every month before taxes, and then how much you're spending every month on things like credit card payments, your student loan payments, your auto loan payments, and how could a mortgage potentially fit into that? And if you have too much debt, you could, you know, be denied a mortgage because you don't want to go over a certain threshold.

• 6:44Marielle Segarra?

  Typically, right, people will put a down payment on a house, and maybe that's like 10% or 20% of the total cost of the house. And then they'll take on the rest as a loan, and that's a mortgage, right?

• 7:00Speaker 02

  Right.

• 7:00Marielle Segarra?

  How do you know what kind of down payment you can afford? And also, what kind of down payment you should put down versus just taking it on as a loan?

• 7:11Speaker 02

  Yeah, totally. So a lot of people think you need 20% down or a really large down payment to get into a home. That's not necessarily the case. Many loans now allow as low as 3% down, which, you know, depending on your home price, is still, can be a lot of money. But the difference between 3% down and 20% down is huge. And one thing I want to note, too, is you want to, in addition to your down payment, you also want to think about your closing costs, because those can be quite high. When we bought our house, actually, we paid slightly more in closing costs than we did on our down payment. So you're gonna need some savings to be able to make it happen.

• 7:50Marielle Segarra?

  What are closing costs?

• 7:52Speaker 02

  Yeah, so it depends on the details of your purchase. They can include things like your title insurance, origination fees. So your lender may charge you a fee just for kind of the service of making the loan to you, and that can be a substantial cost. You may have to have to prepay some of your property taxes or your homeowner's insurance. Basically, all of the fees that you incur as part of the process of originating and closing on your loan.

• 8:23Marielle Segarra?

  Okay, so yeah, you want to factor that in too.

• 8:25Speaker 02

  Mm-hmm.

• 8:26Marielle Segarra?

  How can you figure out how much house you can afford? So that includes a down payment and the mortgage over time?

• 8:34Speaker 02

  Probably one of the best things you could do is talk to a lender. You know, go to your local lender and just like seriously like go in person or call them and just say, "Hey, like, do you think this is possible for me? Like, should I bother?" And they'll tell you. And they'll tell you if there are programs that would be able to help you close the gap and make it happen.

• 8:55Marielle Segarra?

  Takeaway two: figure out whether you're eligible for a loan and how much house you can realistically afford. There's a lot to factor in here, including your down payment, inspection costs, title insurance, which tells you that the person who's selling the home actually owns it, closing costs, your monthly payment, including interest, property taxes, and possibly mortgage insurance, which is a policy you're required to take out if your down payment is below a certain threshold. It's there to protect your lender in case you can't pay your mortgage. Okay, what different kinds of mortgages are there?

• 9:28Speaker 02

  So there's conventional mortgages, which are kind of the most popular type. Most people go for these. But there's also government-backed mortgages, which are FHA loans, VA loans, and USDA loans. FHA loans are really popular, especially with first-time homebuyers, because they have more flexibility. So you can get potentially qualify with a credit score as low as 580. If you have a larger down payment, you could potentially go even lower than that. So those are really helpful for first-time homebuyers or people whose credit is maybe a little rockier. VA loans are specifically for military members or veterans.

• 10:12Speaker 02

  And then USDA loans are available to people in rural or suburban areas.

• 10:19Marielle Segarra?

  Are there any other deals for first-time homebuyers?

• 10:23Speaker 02

  Yeah, absolutely. So a lot of individual lenders have programs. They'll give you money for your down payment and your closing costs. There's also, every state has a housing finance agency. These are geared towards promoting homeownership. They all have programs that can help people get into a home. And a lot of them do offer down payment assistance, either in the form of grants, or sometimes they'll have forgivable loans. And they'll also have assistance for your closing costs as well and maybe, you know, mortgages with competitive rates. Those programs are really helpful and I would recommend people look up your state's housing finance agency and see what they offer because that's a really great way to potentially get money for your home purchase.

• 11:08Marielle Segarra?

  A big part of how much you're going to pay every month with a mortgage is interest rates and where those are at right now. How can people think about interest rates as they're going through this process?

• 11:22Speaker 02

  The best thing that you can do is shop around with a few different lenders, get quotes from them and see who can offer you the lowest rate. Apply for pre-approval with a few different lenders. People can save a lot of money doing that and a lot of people don't do it because it's can be kind of a pain. But not every lender is gonna, you know, offer you a great rate or the lowest rate or whatever. You want to do some comparison shopping because you might be surprised you could save quite a bit of money by getting multiple quotes.

• 11:54Marielle Segarra?

  Okay, so let's say you get pre-approved or you have a sense of how much it's going to cost you and now you're looking on Zillow or you're working with a real estate agent to find a home. What should you think about when you're going into this process and you're looking at house after house?

• 12:15Speaker 02

  My advice is to go in prepared to see a lot of homes. It can take a while to find a home and get your offer accepted, so you may need to try a few times, so be prepared for that. And make sure you're working with an agent who you really trust and you get along well with. I think that's really important. You want to be realistic, but you also want to find something that you're going to be happy with because you're spending a lot of money doing this, right?

• 12:42Marielle Segarra?

  Yeah.

• 12:43Speaker 02

  This is where having a really good real estate agent comes in is they can really, as you go through the home, look at things and go, hmm, I don't know about that or it kind of looks like there might be some water damage here, stuff like that. They'll be on the lookout for that even before you put an offer in because once you do put an offer in, you can have the home inspected by a professional, a licensed home inspector, which is very important. But before you put an offer in, your real estate agent is going to have those professional eyes to be looking and thinking like, you know, is this? The right fit for you? Is this going to be a good long-term investment? Are there maybe issues or concerns with the home?

• 13:24Speaker 02

  Because you don't want to buy something that's right away going to need a bunch of repairs and cost you a bunch of money. Because that's, I think that's one of the big fears with buying a home is that all of a sudden you have this huge financial crisis on your hands because of your home.

• 13:39Marielle Segarra?

  Takeaway three, as you begin the search, expect to see a lot of homes. And find a real estate agent who you trust and really get along with. You should also make sure they're licensed in your state. How do you decide when it's worth it to buy like a fixer-upper?

• 13:55Speaker 02

  Yeah, so I would say if something visibly looks like a fixer-upper and just seems really like you're going to need to put a lot of work into it, I would be very hesitant. Those are often best left to the professionals. Now, as a first-time home buyer looking at starter homes, you might be looking at older homes because those tend to be more in people's price ranges. They are probably going to need some work and you need to kind of think about what is your budget for that? You know, ask a lot of questions. How old is the roof? How old is the HVAC?

• 14:37Speaker 02

  You know, when we moved into our home, we had to replace the air conditioner pretty quickly and that was pretty expensive. But we went into it knowing that the air conditioner was past its lifespan and that was something we might have to do.

• 14:51Marielle Segarra?

  Like central air sort of thing?

• 14:53Speaker 02

  Yeah, yeah. And it was expensive, yeah. So that's something that you really want to think about and just kind of pay attention, especially the big things. You know, the roof is a big one. That can be a big expense if you have to replace it. Pay attention to cracks on the walls in the basement or wherever, you know, you want to watch out for foundation issues. Look out for the really expensive ones because it could be just an easy fixer-upper. It could be something that requires, you know, you to take out a huge loan to take care of.

• 15:23Marielle Segarra?

  And when you get an inspection... When does that come in the process?

• 15:28Speaker 02

  So you'll want to schedule that as soon as possible after you have had an offer accepted. And typically, so typically you'll have a clause in your contract that says you have a period of time to get the house inspected. It can vary how long this is, but it's usually not a super long period of time. So you want to get the inspection scheduled as quickly as possible so you can get someone out there, potentially within a few days, to look at the home.

• 16:00Marielle Segarra?

  Okay, and if there are big problems with it, then you can back out?

• 16:04Speaker 02

  Yeah, as long as you have that clause in your contract that you have that inspection period, someone can come out and look at the house. And then, yes, if they're, if the inspector identifies major problems that you weren't aware of when you looked at the house and made an offer on it, then yes, you can back out of the transaction and keep your earnest money.

• 16:23Marielle Segarra?

  Is it important also to budget for maintenance, monthly maintenance? Like, if you're moving from, let's say, an apartment that you rent into a house with a lawn, then you might have to start thinking about lawn care. Can you do that yourself? Or are you going to have to pay for a landscaper or something like that?

• 16:42Speaker 02

  Yeah, absolutely. So that is definitely something that you'll want to think about. And I think experts usually recommend planning to spend about 1% of your home's value every year on things like repairs or regular maintenance for the home. It varies from year to year. You don't always spend that much. Maybe some years you spend a little more, maybe some years you spend less.

• 17:05Speaker 02

  But yeah, and especially if the property has, like, specific needs, like, oh, we have a really big yard, we're going to need to buy a riding lawnmower, then yeah, that's something that you're going to want to budget for. Or maybe if, you know, you want to hire professional landscapers to fix up your home every spring, like, that is something you're going to want to think about. So yeah, as you're, like, looking at houses, that can especially be helpful to think about is what are the other costs that are going to come with this?

• 17:31Marielle Segarra?

  Takeaway four, don't forget to budget for maintenance. When you take on a new home, you may also be changing your lifestyle. Ask yourself, will I have the time to mow the lawn, or plant the garden, or clean the house? Or will I need to hire someone to help? If you're buying an apartment, think about what fees you might have to pay for maintenance of common areas. Molly, what do you think buying a home represents to people?

• 17:55Speaker 02

  For me, it was about the freedom to have my own space and just the stability of that. I feel more connected to my community. I feel more invested in it and in its longevity and its success as a homeowner. I think for some people, it just can feel like a good financial investment. You know, often it can be, it depends on the home. But you know, as home values rise over time, you benefit from that investment. And it's potentially a source of wealth that you can tap into, or that you can, you know, help your family with, you can help your kids with. You know, it can potentially be really empowering to own a home and to, you know, feel like you achieved something financially

• 18:39Speaker 02

  and you put roots down in a place that is important to you and matters to you. So I think there's that. But you know, it's not, I always like to say, I don't think that it's necessarily, I think, for everyone. And I think you can feel just as empowered and just as invested in your community as a renter. There's a lot of renters out there and there's no right answer for everyone. It's different for everyone.

• 19:03Marielle Segarra?

  Thank you so much for this.

• 19:05Speaker 02

  Absolutely.

• 19:07Marielle Segarra?

  Okay, recap time. Takeaway one, ask yourself if your lifestyle fits with buying a home right now. Are you willing to own it for at least five years? Will you be able to make repairs on the place or to pay someone if necessary? Are you looking for stability? You'll get more of that when you own a home than when you rent. Takeaway two, figure out whether you're eligible for a loan and how much house you can realistically afford. There's a lot to consider, including your down payment, inspection costs, title insurance, appraisal costs, closing costs, monthly payment, including interest, property taxes, and possibly mortgage insurance. Takeaway three, as you begin the search, expect to see a lot of homes. And find a real estate agent you

• 19:49Marielle Segarra?

  trust and really get along with. And takeaway four, don't forget to budget for maintenance. Think about whether you'll have time to mow the lawn, or plant the flowers, or clean this much bigger house, or if you're going to need to hire someone to help. And what is that likely to cost? And remember, homeownership is not for everybody. But if you feel like it's for you, it might be within reach. For more Life Kit, check out our other episodes. We have one on how to make a budget and another on how to decorate your home. You can find those at npr.org/lifekit. And if you love Life Kit and want even more, subscribe to our newsletter at npr.org/lifekitnewsletter. Also, we love hearing from you. So if you have episode ideas or feedback you

• 20:33Marielle Segarra?

  want to share, email us at [email protected]. This episode of Life Kit was produced by Claire Marie Schneider. Our visuals editor is Beck Harlan, and our digital editor is Malika Gharib. Megan Cain is our supervising editor, and Beth Donovan is our executive producer. Our production team also includes Andy Tagel, Margaret Serino, Sam Yellowhorse Kessler, and Sylvie Douglas. Engineering support comes from David Greenberg. I'm Mary El Segarra. Thanks for listening.

• 21:19Speaker 03

  Stay tuned for the following announcements and messages from our sponsors.