Homeownership is often romanticized as the “American dream” or a life milestone, but it’s important to move beyond the dream to have a clear understanding of the full financial reality.
Home prices in New Hampshire have increased by about 78 percent between 2019 and 2025, according to the New Hampshire Fiscal Policy Institute. Today, median home prices in New Hampshire are around $530,000, according to data from the New Hampshire Association of Realtors. The median rent in the state is around $2,000 per month, according to data from Realtor.com. Mortgage rates have also increased in recent years, with average 30-year fixed rates ranging between 6 and 7 percent. These statistics can make homeownership feel overwhelming and out of reach.
While you can’t control housing prices, there are clear steps you can take to prepare your finances and put yourself in a stronger position to make your homeownership dreams a reality.
Start by reviewing your credit report and correcting any errors you find. Your credit impacts your ability to qualify for a mortgage and the interest rate you receive, which directly affects your monthly payment. By law, you are entitled to one free copy of your credit report annually from each of the three major credit reporting agencies. You can obtain your free report by visiting AnnualCreditReport.com. This is the only federally authorized website for free credit reports. Be cautious of lookalike websites that may charge fees. If you find errors in your report, you have the right to dispute them at no cost.
Pay off your current debt. Your debt-to-income ratio is a part of the borrowing process that many people overlook, but lenders use it to determine loan eligibility. The general guideline is to keep the debt-to-income ratio below 36%, according to the Consumer Financial Protection Bureau, though some loan programs may allow for higher ratios. Debt includes your estimated mortgage payment, which includes property taxes and homeowners insurance, as well as other obligations such as student loans, car payments, and credit card payments. If you are paying U.S. averages, around $500 a month toward student loans and about $750 a month for a car payment, according to NerdWallet, that is over $1,200 a month in debt payments that could otherwise go toward housing costs. Lower your debt and improve your borrowing power.
Build savings for emergencies, a down payment, and closing costs. Aim to save three to six months of expenses as an emergency fund, 3 to 20 percent of the purchase price for a down payment, and an additional 5 to 10 percent of the purchase price for closing costs to cover fees required to close on your mortgage loan.
While there may be loans available to you that only require a low percentage down payment, consider a larger down payment of 20 percent or more if you want to avoid having to pay private mortgage insurance (PMI) or lower the overall amount you borrow to lessen the total interest you pay on your mortgage.
Although PMI allows some buyers to enter the housing market sooner, it is important to understand the cost and how it fits into your overall budget. PMI protects the lender if you default on your loan, and you pay a monthly premium of about $30 to $70 per $100,000 borrowed. This additional $100 or more each month is only an insurance payment and does not reduce your loan balance.
Qualifying for a mortgage is only one part of the equation. Just because a lender approves you for a certain amount does not mean you should spend that much. One of the biggest misconceptions borrowers have is that if a lender approves you for the loan, you can afford it.
You need to look beyond “Can I afford the mortgage?” and consider other homeowner expenses as well. Homeowners’ association fees, property maintenance and repair costs, and utility payments all contribute to the overall financial impact of homeownership and must be accounted for to determine whether you can truly afford the home. A general estimate for annual maintenance costs is about 1 to 3 percent of your home’s value. Older homes may also require more upkeep and maintenance than newer homes.
Most people want their homes to be a source of comfort and rest, not a constant source of stress about whether they can afford to maintain their homes, pay bills, or feed their families. Considering all expenses before buying a home can help prevent you from becoming house-poor, meaning your mortgage and related housing costs consume the majority of your income, limiting your ability to afford other everyday expenses or save for other goals.
Creating an estimated budget that includes all these costs before committing to a mortgage is essential to evaluating how homeownership will realistically impact your financial situation. One practical step is to start living on the budget you expect to have as a homeowner. If your housing costs are going to increase, begin setting that money aside now. This can help you build your down payment and see if your estimated budget is realistic.
Homeownership should support your life, not limit it.
Before you decide to buy, consider whether the home you want actually fits your real life. Can you afford the maintenance of that long, winding paved driveway? Is there room in your budget if the taxes increase next year? Do you need a larger home, which costs more to heat, cool, and maintain? How will this home impact your ability to reach other goals? Do you need two incomes to afford the mortgage, and does that align with your long-term plans of raising a family? Ask yourself what you actually need versus what you want to help ensure the home you buy works best for your life and long-term goals.
It is also important to think about whether now is the right time to buy. If you plan to move in a few years, the costs of buying and selling may outweigh any financial benefit. There is no perfect timeline. Your situation is unique, and your decision should reflect that.
It is also okay not to own a home. Choosing between renting and owning is not just a financial decision. It is a personal one based on your values, your goals, and what you want your life to look like. If you do decide to buy, be intentional about the home you choose. If you choose to rent, the benefits include flexibility, often lower monthly costs, and no maintenance or repair responsibilities. Depending on your season of life, renting may be the better choice.
Homeownership can be a powerful way to build long-term stability and equity, but it also comes with responsibility and risk. When you take the time to understand the full picture and prepare intentionally, you put yourself in a position where homeownership supports your life rather than creates financial stress.
If homeownership is your goal, focus on more than just qualifying for a mortgage. Financially prepare so the home you buy supports your life, not your stress.
Renee Chapman (Sangermano) is an Accredited Financial Counselor candidate and founder of Climb Higher Financial Coaching, where she helps individuals and families navigate budgeting, debt and everyday financial decisions.