Creative Tips for Overcoming Financial Roadblocks

If you worry that you can't afford a decent house-or any house, here are some steps you can take to ease your financial woes.

1. Reduce your debt. This will free up cash for monthly house payments and reduce your debt-to-income ratio.
2. Make a new budget. Revise your monthly budget, keeping your homebuying goals in mind. If you have targets, you're more likely to control your spending habits to meet them.
3. Cut the costs. You may be able to get a roommate until you're ready to buy a place, apply an expected work bonus toward your fund, go back to basic cable, or shop more at thrift shops. Check out local freecycle groups for free items.
4. Boost your credit score. For bad credit, take 6 months to a year to improve your score by sending timely payments, paying off high interest loans (like credit cards) and closing select lines of credit. If you have little or no credit history, ask a close friend or family member with a high score to add your name to their credit cards. And be prepared to provide evidence of your good standing in the form of letters from old landlords affirming that you paid rent on time and proof of regular bill paying (such as PG&E or cell phone statements).
5. Consider alternative financing. Check out low-or no-down payment loans or the variety of adjustable rate mortgages with low initial payments.
6. Borrow from a nontraditional source. Consider different and creative options for borrowing money, from you family to the seller of the house you buy.
7. Buy with a friend. Know someone (or several someones) who are also looking to break into the housing market? Consider buying together. Remember: joint ownership doesn't always have to mean living together, or even owning equal shares in the property.
8. Cash out your other investments. Consider cashing out of stocks, bonds, mutual funds or other property in order to come up with a down payment. The more you pay down, the lower your monthly mortgage payment will be.
9. Consider other home types, sizes, conditions, or locations. Look into a condo or a fixer-upper. Keep in mind that your first home is not necessarily the one you'll live in forever-and the equity you accrue with a "starter house" will help put you in home of your dreams someday.
10. Wait. If you expect prices and interest rates to remain stable you can always delay your home purchase while you save up money or work your way toward that raise.

This excerpt is taken from "Nolo's Essential Guide to Buying Your First Home," by Ilona Bray, Alayna Schroeder & Marcia Stewart. Copyright Nolo, 2007.