With rising real estate prices, for many, it’s getting harder to make the dream of homeownership a reality. Over the past year, housing prices in the U.S. rose by 4%, making it more difficult for those hoping to wait and buy a home a few years down the line.
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To get a sense of what the market could look like in the not-so-distant future, I asked ChatGPT what the cost of affording a home would be in five years. The AI bot analyzed home price growth, mortgage interest rates, inflation, wages and affordability to come up with an estimate.
ChatGPT noted that the median home price today is around $420,000 and predicted it will rise to between $510,000 and $580,000 by 2030. It based its analysis on the assumption that home prices will grow 4% to 6% annually, inflation will average 2.5% to 3% and mortgage rates will remain within 5.5% to 7.5%.
Hearing that property prices may continue to rise until 2030 isn’t the greatest news for potential homebuyers. However, ChatGPT did offer some guidance that may lessen the blow of the price hike. Here are some tips to help lower your monthly payments and make a home more affordable.
Start Saving Aggressively Now
The AI bot’s first piece of advice if you’re hoping to afford a home in 2030, you should “[s]ave for down payment + closing costs (~25% total). Take advantage of high-yield savings accounts or CDs.”
Saving is an obvious but necessary tip. The more you have for a down payment, the less you’ll need to pay off over time.
Today, high-yield savings accounts can yield returns of over 4% depending on the bank, while CDs can offer around the same depending on the term. Both options are safe investments that will help your money grow. However, while somewhat riskier, investing in stocks or index funds could amount to a higher return, such as 10%.
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Build and Monitor Your Credit Score
Another piece of advice is to boost your credit score. Chat GPT said, “Aim for a score of 740+ for best mortgage rates. Avoid new debt and pay off credit cards monthly.”
A high credit score is essential because it directly affects how much you’ll pay over time and whether the lender approves you for a mortgage. With a high credit score, the lender will see you as less of a risk to pay back what you owe. As a result, you’ll receive a lower interest rate and pay less each month.
Consider First-Time Buyer Programs
With a decent amount saved and a high credit score, you’ll be able to get a mortgage with good terms. However, there are even more suggestions from ChatGPT, such as looking into a first-time buyers’ program. It explained, “These may still exist in 2030 with low down payment options and closing cost assistance.”
First-time buyer programs make it easier for those purchasing their first home, or who haven’t owned a home in the past three years, to afford the mortgage. Those who qualify may be eligible for local, state or federal programs that help by lowering interest rates, down payments or providing tax credits.
Factor In Rising Costs of Ownership
A common mistake that many first-time homeowners make is budgeting based on their monthly mortgage payment alone. ChatGPT said, “Property taxes, insurance, and maintenance will likely be higher. Don’t just budget for the mortgage — think total monthly cost.”
This is an excellent point because the amount you’ll need to pay each month is much higher than the mortgage payment. You should plan to include property taxes, insurance, utilities, maintenance and possible homeowners’ association fees on top of your mortgage payment to create an accurate budget. Various factors such as your home’s age, location, condition and warranty will influence the amount you need to set aside for this.
Prequalify and Lock In Rates When Possible
One more thing to consider, according to ChatGPT, is prequalifying and locking in your rates. The AI bot said, “When shopping for homes, get prequalified to understand your budget and potentially lock a rate early.”
Prequalifying for a mortgage means getting an estimate of what you could borrow for a home based on the current state of your finances and credit. It’s a great way to figure out what you can afford and how you’ll budget. Locking in your interest rate allows you to maintain the same rate while shopping for a home, even if interest rates rise.
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This article originally appeared on GOBankingRates.com: I Asked ChatGPT Whether Buying a House Will Become More Affordable in 5 Years: Here’s What It Said
