Homeownership is a life-changing event that comes with many benefits not available to renters. Whether you are preparing to buy your first home or are already experienced with the home-buying process, the key to a successful and less stressful purchase is planning.
Keeping tabs on your financial standing, along with the current housing market, can let you know when the timing is right to buy, especially in the new year. In this blog, we will review how careful planning can make your homebuying journey easier in 2026.
Prepare Your Finances for Homeownership in 2026
There are several steps to becoming a homeowner. The first thing is to evaluate your financial situation. Identify how much money you have saved for a down payment, your current credit score and credit history, and your monthly income. They all play important roles in getting approved for a home loan.
- Amount saved: There are major costs involved when buying a home. Having money set aside for this can eliminate some of the worry and stress. You’ll need savings to pay for closing, down payment, moving, starting up utilities and more. If you haven’t yet, dedicate a savings account specifically for your home purchase and save as much as possible. Doing so will help you focus and prepare for homeownership.
- Credit score: Your credit score is used by lenders to determine your credit worthiness. This score, from 300 to 850, is based on your credit history. Improving your credit score gives you the best opportunity to get a low interest rate on your home loan. Start by obtaining your free credit report at annualcreditreport.com. Review it for accuracy and dispute any information that isn’t correct.
- Debt-to-Income: Your income determines how much of a home loan you can afford. Lenders use your debt-to-income ratio (DTI) to compare your income against the debt you must repay. The Debt-to-Income (DTI) ratio is a financial metric that compares an individual's total monthly debt payments to their gross monthly income. It’s commonly used by lenders to assess a borrower’s ability to manage monthly payments and repay debts. Having a high debt-to-income ratio, such as over 45%, can negatively impact your chances of being approved for mortgage. Lowering your DTI increases your chances of loan approval.
Having a good understanding of your finances lets you make changes that put you in a better position to buy a home.
2026 Housing Market Factors to Watch
To help you recognize the right time to buy, you’ll need to know what affects the housing market. The housing market depends on a variety of economic factors, but the two most important are interest rates and housing inventory.
First, keep tabs on how interest rates are moving and what experts say might happen to them over the next few months, according to CBSNews.com. The Federal Reserve dictates whether rates should rise or fall based on factors such as unemployment rates and inflation. Since the pandemic, mortgage rates have risen due to inflation and the Fed has increased rates in an attempt to slow down inflation.
Staying informed about what the Fed will do next can help you time your purchase to get the best rates, according to RocketMortgage.com. A lower rate on a mortgage means you’ll pay less over the life of your loan, saving you money on interest.
Housing inventory is about 14% below pre-pandemic averages as of December 2025, but inventory has been rebounding steadily over the past two years. This increase has resulted in properties spending a longer time on the market as buyers have more options to choose from. Keep in mind that housing inventory will vary by location, so do your research in your preferred cities and neighborhoods to identify the housing market in your area.
Shop for the Best Rates and Types of Loans
Once you are ready to buy, it’s time to apply for a loan. The types of mortgages vary so shop around. Learn about the various home loans available and find the one that fits your unique financial situation. Each program has its own requirements, including a minimum credit score:
- Conventional loans require a minimum of 620 to be approved.
- Federal Housing Administration (FHA) loans require a minimum of 580 or greater, although scores as low as 500 may be approved if you provide a 10% down payment.
- The U.S. Department of Veterans Affairs (VA) loans don’t have minimum credit scores. Some lenders, however, may still require a 620 minimum score unless there is a large down payment, according to Fidelity.com.
- The U.S. Department of Agriculture offers guaranteed mortgage loans for eligible buyers in rural areas. These loans don’t have minimum score requirements, but lenders may still require credit scores of 640 or higher.
As mentioned, there are several types of mortgages available. Here’s a summary of the main types:
- Fixed-rate mortgages are ideal for borrowers who plan to remain in their home for the long term. These loans come with 15-, 20- or 30-year terms. The interest rate and monthly payments remain constant over the life of the loan, which makes budgeting easier.
- Adjustable-rate mortgages offer a lower fixed rate for an initial period, after which they adjust periodically based on the current market rate. The lower initial rate is good for homeowners who want to purchase now and expect their income to grow.
- Conventional loans offer flexible terms of 15, 20 and 30 years. The down payment can range from 3% to 20% of the home price. Conventional loans can have stricter qualifications than government-backed loans. They follow guidelines set by Fannie Mae and Freddie Mac.
- VA loans are available to veterans, activity-duty military service members and others related to the military. They have competitive interest rates and flexible credit requirements. The VA guarantees the loan so there no down payment is needed.
- FHA loans are backed and insured by the Federal Housing Agency. They have lower credit and down payment requirements, such as a 3.5% down payment. These loans are ideal for first-time homebuyers who may not have enough money for a down payment. Private mortgage insurance is required.
How Travis Credit Union Can Help
Travis Credit Union is focused on your financial wellness, which includes helping you become a homeowner. Our knowledgeable mortgage loan consultants will work with you every step of the way so you’ll understand the home loan process and be ready when it’s your time to buy. Visit Traviscu.org to get started.
Another way TCU can help is through our free Knowledge Base financial education platform. Learn about a variety of related topics, such as mortgages, buying a home, improving your credit score and more. Enroll in Knowledge Base today!