You? Buy a home? If that prospect sounds as unlikely as your becoming the next U.S. president—well, this campaign season has shown us that anything can happen.
Sure, amassing the funds and slogging through the necessary paperwork for your own piece of the real estate pie can be daunting, especially if you’re a less-than-stellar loan candidate. Still, if you just assume there’s no way you could buy a home, without doing any research, you could be missing out.
Here are some oft-cited reasons people don’t buy a home, and the reality checks showing why they shouldn’t give up hope.
Reason No. 1: ‘I don’t have enough money for a down payment’
This is probably the most common justification for not making the leap into homeownership. After all, few people have a huge chunk of cash lying around—and you need 20% down to buy a home, right? WRONG!
“Needing a 20% down payment has lingered as a myth for years and causes many potential home buyers, including those in the millennial generation, to miss out on getting into a home,” says Christina Bartning with National MI, a private mortgage insurer in Emeryville, CA.
AJ Smith, a personal finance expert at SmartAsset, points out that with a loan backed by the Federal Housing Administration or Department of Veterans Affairs, you can usually get by with a down payment of 3% to 5%.
Low to No Down Payment Loans:
3% Conventional – usually requires a first time home buyer course certification.
5-10% Conventional – sooooo much more popular than 20%
3.5% FHA – stricter guidelines for property requirements, so shop newer!
0% VA – Active Military or Honorably Discharged Veteran? TAKE ADVANTAGE! It’s not as hard as you think.
Reason No. 2: ‘I can’t afford a mortgage payment’
“Some people don’t realize the amount they pay in rent is more than if they had a mortgage,” says Realtor Kenneth Cagan of the Cagan Team in Coral Springs, FL. “Landlords are trying to recoup their taxes, insurance, maintenance fees and still make a profit. When you buy, you’re investing in yourself.”
Most rentals come with a first, last, and security deposit prior to move in, right? Right. You also have an application fee, a pet deposit if applicable, and a monthly cost for renters maintenance (either time or $ for mowing the yard, cleaning the interior, etc.). Why not put all of that time and money into a home that you own! Equity is an amazing thing. Purchase the property!
Reason No. 3: ‘I don’t have good enough credit history to get a mortgage’
So you’ve made some late payments, or have other skeletons in your past that have dinged your credit score. That doesn’t put a mortgage out of reach.
“If you’ve paid down your credit cards and kept a steady job, your application may be approved,” says SmartAsset’s Smith. “Potential home buyers with bad credit can also explore options like lease-to-buy programs, financing through the seller, and loans from private lenders.”
Get this: Some private mortgage insurance programs allow for credit scores as low as 620, Smith says.
Also, local lenders are a great source of information. Instead of relying on a National Lender, speak with some of your local banks or credit unions. Local lenders can be quite creative with their loan packages, how much they are willing to lend, and different programs they offer.
Reason No. 4: ‘I don’t have any credit history at all’
Even without a credit card, there are ways to build credit history, says Anne Postic of Mortgages.com.
“If you’re a renter, ask your landlord about reporting your payments to establish a history. Experian makes it easy for your landlord to report your payments, or for you to do it yourself.”
Reason No. 5: ‘I haven’t been at my job long enough’
“Work history is important,” says Jeremy David Schachter with Pinnacle Capital Mortgage in Phoenix AZ. “But even if you recently changed jobs and have only been there for a month, you can get qualified depending on your income and field.” A letter from your boss or place of employment will go a long way, so be sure to ask if you fear your relatively brief employment history might be an issue.
Reason No. 6: ‘I can’t find a home I like in my price range’
“People often think they have to buy their dream home first,” says Fort Myers, FL, Realtor Angeline Sackett. But making a dream home a reality takes time. After all, they call first homes “starters” for a reason, right?
Focus on what is important to you…needs vs wants. You may want a sunken living room with a beach view and a hunky cabana boy, but stick to what you can afford now and do not go over your budget.
And of course, if you have any questions, reach out to a REALTOR! We are your one stop shop for information whether it’s pressure washers, roofers, lenders, the nearest hardware store, the best pizza delivery for the first night in your house…whatever. We are here to support you before, during, and after you have moved in to your very own home.
Danielle MacCarthy, REALTOR
Credit: Margaret Heindry & Realtor.com