To pay for a second-hand home, buyers typically use a combination of mortgage financing, down payment savings, and pre-approval. Secure pre-approval from a lender to determine affordability and strengthen offers. Save for a down payment, which is often 5-20% of the purchase price, to reduce mortgage costs and avoid private mortgage insurance (PMI). Budget for closing costs (2-5% of the loan amount) and moving expenses. Consider alternative options like a home equity loan or personal loan for smaller down payments, though these may incur higher interest rates.

Mortgage financing remains the most common method due to lower interest rates compared to alternative loans. According to the Federal Housing Finance Agency, average 30-year fixed mortgage rates were 6.5% in 2023, making monthly payments manageable for most buyers. A 20% down payment minimizes PMI and aligns with conventional loan requirements, reducing long-term costs. For example, a $300,000 home with a 20% down payment ($60,000) and a 30-year loan at 6.5% results in a monthly payment of $1,807, excluding taxes and insurance.

Savings are critical for upfront costs. The National Association of Realtors reports that 63% of buyers used savings for their down payment. However, building a 20% savings requires discipline, as the average savings rate is 4.2% (Federal Reserve, 2023), translating to roughly 5 years for a $60,000 down payment. Pre-approval also helps buyers compete in competitive markets, with 76% of properties purchased in 2023 going to pre-approved buyers . Closing costs average $5,000-$7,500, often covered by the seller in negotiations. Alternative financing options, like FHA loans (3.5% down), cater to lower budgets but require mortgage insurance. Ultimately, a mix of mortgage planning, savings, and strategic budgeting ensures affordability and reduces financial risk.