How to prepare to buy a home in the next five years

Buying a home used to be a financial milestone young people added to their to-do list once they hit a certain stage of life. Nowadays, that particular goal seems out of reach for many. 

More than half (53%) of Americans who are not currently homeowners say that owning a home will never be financially affordable, according to a survey of 4,626 adults conducted by The Harris Poll on behalf of Northwestern Mutual earlier this year. Their concern is for good reason: Housing prices have been consistently rising since 2012, with Zillow data showing that the typical home in the U.S. cost around $369,000 in June — up from roughly $260,000 just five years ago. Some places are getting hit with larger price increases than others. The typical home value in San Jose, California rose 7.9% between December 2023 and December 2024, the highest jump of all the metros, with New York, NY and Hartford, Connecticut following behind with 7.1% year-over-year increases, according to Zillow. Providence, Rhode Island and Cleveland, Ohio were next with 7% and 6.3% increases, respectively. 

The numbers are daunting, but potential buyers shouldn’t lose hope. Whether you're just starting out, rebuilding after a financial detour or trying to turn steady income into long-term security, buying a home is within reach, says Elias Crist, associate wealth advisor at Regent Peak Wealth Advisors. 

“You don’t need to be debt-free or wealthy,” Crist says. “But you do need a plan.” 

Here are six steps to take now if you’re preparing to buy a home in the next five years. 

1. Build your net worth statement 

The first step to getting ready for this big purchase is to evaluate where you’re starting from. Crist recommends calculating your net worth — your assets minus your liabilities — to get a snapshot of your current financial position. 

To start, add up your assets, such as the balance in your bank and investment accounts, as well as valuable property like a car. Then, add up your liabilities (what you owe), such as credit card, student loan, auto loan, medical loan or personal loan debt. 

Subtract the total amount of your liabilities from the total amount of your assets to get your net worth. 

2. Pay off debt 

Holding some types of debt can be a healthy part of a financial plan. But when preparing for homeownership, you’ll want to reduce high-interest debt, especially from credit cards and personal loans, Crist says. High-interest debt can drain your cash flow and hurt your credit score.

There are two common strategies for paying off debt you can implement. The “avalanche method” involves paying off your debt with the highest interest rate first, then moving on to the debt with the second-hightest interest rate, and so on. The “snowball method” involves paying off the debt with the smallest balance first, then moving on to the second-smallest balance. Choose whichever one makes sense for you. 

When it comes to student loans or low-interest auto loans, those debts aren’t necessarily deal breakers, but they should be managed responsibly and factored into your monthly obligations, Crist adds. 

3. Boost your credit score 

Your credit score indicates to potential lenders how likely you are to make good on your loans — and the higher your score, the more likely you are to qualify for a mortgage and get better terms, such as a lower interest rate. 

“The most important planning you can do five years out from purchasing a home is to improve your credit score as much as possible,” says Anjali Jariwala, a financial advisor and founder of FIT Advisors. 

She says to always make your payments on time, keep your credit card balances low and try to pay them off each month, and keep track of your credit utilization ratio. (Your credit utilization ratio is the amount you owe across your debts compared to what your available credit is, and the lower it is, the better for your credit score). You should also review your credit reports regularly and quickly report any errors. A secured credit builder card could also be a great way to give your credit score a boost. These cards allow you to spend only the funds in your account, which are held as ‘reserved funds’ as you make purchases to then pay your bill at the end of the month. They minimize the risk of debt as you can only spend the amount of money in your account. Your on-time payments each month are then reported to the three major credit bureaus (Equifax, Experian and TransUnion), helping build your score.

With Current, you can use your Build Card to build credit while you bank with everyday purchases.* It connects to your existing spending balance, and as you spend the funds are held in reserve and then used to pay your bill each month. We then report these as ‘on-time’ payments each month to the three major credit bureaus. Because the funds you spend are held in reserve, you don’t have to worry about paying your bill each month and if you set your account to AutoPay, you can make sure you never miss a payment. 

4. Save up for your down payment

You’re also going to want to increase your savings, since most mortgages require a 20% downpayment — and if you can’t afford that, you may have to pay for mortgage insurance which increases the monthly cost of a new home. Some banks may also require you to have a certain amount of cash reserves, like six months of the mortgage payment. 

“This means you'll need to save even more than just the 20% to fully purchase a home,” she adds. “This is a great time to clean up your finances and understand your cash flow so you know how much home you can really afford.” 

With Current, you can earn an up to 4.00% boost annually when you set money aside via our Savings Pods. And our Round-Ups feature means that we’ll round up your purchases to the nearest dollar, helping you add a little more to your savings every time you swipe your card. 

5. Educate yourself on the homebuying process

Breaking down the complicated process of how to actually buy a home is understandably a major worry for many buyers. Nearly half (42%) of homebuyers realized they didn’t know enough about the process after they’d already gotten started, and 70% of homeowners wish they’d had more knowledge before they started looking for a home, according to a report published last year from ConsumerAffairs. 

Instead of waiting until you’re fully ready to buy your home, learn how the process works ahead of time, Crist says. Start exploring different types of mortgages, local realtors who can help you understand housing markets and what is realistic for your budget, first-time buyer programs in your state or city, and what goes into closing costs, property taxes and maintenance. 

6. Reassess and adjust each year 

Be ready to make adjustments to your plan. Once or twice a year, sit down and revisit your net worth, debts and payments, credit score and down payment fund, Crist suggests. 

“Your circumstances may change, and that’s okay,” he adds. “The key is to stay committed to your timeline, even if you need to make adjustments. A five-year plan doesn’t require perfection — it just requires direction.” 

*Individual results may vary. Using your credit card responsibly may allow you to improve your credit score. Credit building depends on various factors, including your payment history, credit utilization, length of credit history, and other financial activities.