Are you scared to buy your first home?
Here are some reasons people don’t buy a home, and the reality checks showing why they shouldn’t give up hope.
Reason 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. You can usually get by with a down payment of 3% to 5% with a loan backed by the Federal Housing Administration or Department of Veteran Affairs. In addition, grants are an excellent way for young buyers with good credit and stable employment to subsidize their down payment. These can typically be obtained by taking homeownership courses or purchasing in designated community development areas. However, if you do put down less, keep in mind you’ll need private mortgage insurance until you pay down the loan to the 20% threshold.
Reason 2 – “I can’t afford a mortgage payment”
Some people don’t realize the amount they pay for rent is more than if they had a mortgage. Landlords are trying to recoup their taxes, insurance, maintenance fees and still make a profit. When you buy, you’re investing in yourself. For first time buyers with low to moderate incomes, organizations such as Neighborhood Housing Services of Richmond have plenty of experience in helping.
Reason 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. Potential home buyers with bad credit can also explore options like to lease-to-buy programs, financing through the seller and lenders through private lenders. Get this : Some private mortgage insurance programs allow for credit scores as low as 620. Meanwhile, you can slowly improve your credit score by paying your bills on time and keeping your balances and inquires low. But, typically mortgages for people with a lower credit score do come with a higher mortgage rate. And a very low score may require a higher down payment.
Reason 4 – “I don’t have any credit history at all”
Even without a credit card, there are ways to build credit history. If you’re a renter, ask your landlord about reporting your payments to establish a history.
Reason 5 – “I haven’t been at my job long enough”
Work history is important. 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 6 – “I can’t find a home I like in my price range”
People often think that they have to buy their last home first. Making a dream home a reality takes time. After all, they call first homes “starters” for a reason!
