Home ownership has reached a twenty-year low. According to the Guardian, less than 64 percent of Americans are homeowners. Among the many factors contributing to low homeownership rates are stagnant wages, rigorous mortgage qualification criteria, and unhealthy financial habits.

Speaking of financial habits, 80 percent of Americans are in debt to the point that the average American dies with over $60,000 in unpaid bills, according to CBS. Despite best efforts, many Americans are struggling to afford a home. Fortunately, this article is designed to help readers live in a financially healthy manner in order to purchase a dream home.

Develop a healthy credit score

Whether you qualify for a mortgage is dependent on your credit score. Lending institutions use credit scores to assess your level of financial reliability. Mortgage applicants with poor scores are considered too risky for most reputable institutions to lend to. And even if you are able to secure a mortgage, the interest rate will be quite high. (For reference, FICO reports that the majority of Americans have a credit score below 700).

On the other hand, those who submit a mortgage application with a healthy credit score are more likely to be approved and will be offered a reasonable interest rate.

In order to develop a healthy credit score, prospective homeowners must make it a point to pay off debt, and to pay bills on time. In time, living a healthy financial lifestyle will cause your credit score to increase.

Use a credit score tracking tool like Credit Karma or Credit Wise to stay on top of your credit score. Alternatively, the federal government requires that the three credit bureaus (Experian, Equifax, and TransUnion) provide Americans with a full credit report free of charge at least once a year. Visit the Federal Trade Commission’s website to learn more.

Discuss financial priorities with your significant other

For those who plan to purchase a home with a significant other, it’s important to discuss financial priorities before making such a big purchase. Yet, a study by Lawyers.com found over 25 percent of married couples say that they avoid talking about finances with their significant other.

One way to discuss financial priorities with a partner is by agreeing how you both plan to spend your money. The simple 50/20/30 rule of money management can be a good way to begin. Following the rule, couples would spend 50 percent of income on essentials like rent and car payments, 20 percent would go to savings and investments, and the remaining 30 percent would go to personal non-essential expenses.

Once you and your significant other are aligned as to how you plan to spend your money, you’ll be able to make the appropriate adjustments to live within your means. Switching to Juul e-cigarettes instead of paying for traditional cigarettes is one way to save a few dollars. Alternatively, rather than seeing the latest blockbuster movie, you can opt for an indie film like People You May Know.

Determine what mortgage type is right for you

There are a variety of mortgage types available to qualifying homebuyers. Fixed rate mortgages, which are used by 75 percent of those who have a mortgage, are usually best. With a fixed rate mortgage, the interest rate associated with the home loan does not fluctuate over time. This makes budgeting expenses considerably easier.

Variable rate mortgages, on the other hand, offer fluctuating interest rates. This may be a better option for those who are unable to qualify for a traditional mortgage.

Home buyers can also choose from a variety of mortgage lengths. The two most common mortgage lengths are 15 and 30 years. The length you choose will depend on how much you want to pay each month. 

Purchase a home that will appreciate in value

According to Zillow, home values have increased a bit over 3 percent this year. Potential homeowners should be sure to make an effort to purchase a home that will significantly appreciate in value over time.

There are a number of ways to do this, one way is by finding a neighborhood with excellent local services. Often, others will want to live in a town that is safe, offers great schools, and features many amenities.

Alternatively, another approach to finding a home that may appreciate significantly in value is looking in a gentrifying neighborhood. Take Williamsburg, Brooklyn as an example. The neighborhood has been gentrifying for the past decade. As a result, home prices have increased 80 percent in the last ten years according to Trulia.

Conclusion

Owning a home is an essential part of the American dream. It means that you are financially independent and responsible, plus it can be a fantastic long-term investment in some cases. In order to qualify for a mortgage, be sure to maintain a healthy credit score.

Speak with your significant other about financial priorities, and research various mortgage options to find the right one for you. And be sure to purchase a home that will appreciate in value over the long term.

One parting piece of advice to would-be homeowners, be sure to protect your home once you’ve successfully moved in. Invest in a good home owner’s insurance plan, and install a security system in order to keep your eye on your significant financial investment.