Personal Finance > Five Tips
Affording a house
5 Tips: Ways you can afford to buy a house
May 5, 2004: 4:38 PM EDT
By Gerri Willis, CNN/Money contributing columnist

NEW YORK (CNN/Money) - You can say one thing about the housing boom: Prices may have been sky high, but at least mortgage rates were low. Now that one bright spot is disappearing. Already, rates are well off their lows and experts say they will move even higher.

What can you do if you feel housing affordability slipping away? Here are today's five tips.

1. Go prefab.

Buying a prefab house -- that is one that is constructed in a factory and then assembled on site -- can be a low cost alternative.

To get a better sense of what's involved, check out some of the architects selling these homes on line; and Also, for information on the Quik House design, visit

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CNNfn's Gerri Willis shares five tips on ways you can afford to buy a house.

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Keep in mind that you'll need to hire a general contractor to grade your site and supply electrical and plumbing services to your prefab. You can get delivery in as little as a month, much less time than it takes to build your own.

But keep in mind that it can be difficult to convince bankers to issue mortgages for prefab homes. Look for advice from the companies designing and building these homes, many of whom have developed special arrangements with lenders.

2. Try a fixer-upper.

One way to cut your housing costs? Buy a home that has a few problems that are keeping other potential buyers away, says Brad Inman of, a real estate Web site for consumers.

Let's face it, shag carpeting and harvest gold kitchen appliances are a turnoff for many buyers, but to the shopper who can see past those superficial issues, there is a bargain to be had.

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To be sure, you'll want to avoid homes with structural problems that will cost you tens of thousands to fix. For example, electrical and plumbing systems should be in good working order, as well as the roof and foundation. But if the three-bedroom home you're considering has a below-market price because it has just a single bath and an outdated kitchen, you may want to snap it up.

If you're buying a fixer-upper, check out Fannie Mae's Homestyle Program. The Federal Housing Administration provides loans that will cover the costs of both your purchase price and the cost of repairs. A good lender or mortgage broker will be familiar with these programs.

3. Get a roommate.

Another option is taking on the responsibility with another person. Generally, mortgage bankers do not look at this situation any differently then if you are a married couple looking to buy a home. They will simply look at both incomes as well as both credit ratings.

The key is that both live in the home and that both people are on the loan and the title (both owners) of the property, according to Bob Walters, Chief Economist of Quicken Loans.

Keep in mind though, if you sign on with someone else and they suddenly decide they don't want to pay their portion, you'll be on the hook.

Separately, you may decide to buy a property on your own and then rent out a section of your home. While this may be a great way to help you pay down the mortgage, this income will not help you initially qualify for a mortgage. This income is referred to as "border income".

Because of the uncertain nature of the income and the ease with which it could be falsified, most mortgage programs don't allow it. Walters says Fannie Mae and Freddie Mac require that a landlord have a two-year history of owning rental property before they can use rental income in calculating the amount they can borrow.

There are, however, programs that do allow this requirement to be waived if a current lease agreement exists.

4. Shop the margins.

Many buyers get focused on a single neighborhood or maybe zip code they want to live in. But in this market, you may not have that luxury.

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The truth is that many buyers are being forced to consider neighborhoods that might not have been first on their list because of schools or the length of their commute. Sticking with your first neighborhood choice makes it all too easy to get drawn into a bidding war in red-hot locations.

Another option is buying spec homes. These new homes -- built "on speculation" without buyers lined up first -- are sometimes the first to experience price reductions when a market turns. If rates were to rise dramatically this year, builders could find themselves with fewer buyers than they expected.

5. Get government help.

If you're having trouble buying a home because you can't afford the down payment, take a look at the Department of Housing and Urban Development's American Dream Down Payment Initiative program.

Passed last year, the program provides qualified applicants with assistance up to $10,000 or 6 percent of the purchase price of the home. Your income must not exceed 80 percent of the area's median income to qualify. For information on who to contact in your state, go to Or call HUD at 202-708-1112.

Gerri Willis is a personal finance editor for CNN Business News. Willis also is co-host of CNNfn's The FlipSide, weekdays from 11 a.m. to 12:30 p.m. (ET). E-mail comments to  Top of page

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