The prospect of you becoming a homeowner might initially appear improbable. The weight of financial and mental hurdles can seem insurmountable at first glance. However, before you completely dismiss the idea of owning your own property, consider this: delving into homeownership demands more than just accepting a few common misconceptions. Let's explore some frequently cited reasons people hesitate to buy a home and provide a reality check that should renew your hope.
Reason 1: 'I lack the funds for a down payment'
This refrain is often heard as the prime rationale for not embarking on the homeownership journey. The perception that a substantial 20% down payment is a prerequisite can be deceiving. Contrary to this notion, Christina Bartning from National MI, a private mortgage insurer, asserts that the 20% down payment myth has persisted for far too long, discouraging many potential homebuyers. The truth is, you can secure a home with a down payment as low as 3% to 5% through loan options backed by the Federal Housing Administration or the Department of Veterans Affairs.
Furthermore, real estate professional Mike Murray highlights that grants can offer a viable avenue for young buyers with solid credit and steady employment. By taking homeownership courses or buying in designated community development areas, you can access these grants. Nevertheless, if you opt for a lower down payment, bear in mind that private mortgage insurance will be required until you reach the 20% loan threshold.
Reason 2: 'Mortgage payments are beyond my means'
People often underestimate the costs of renting versus owning. When you purchase a home, you are investing in yourself rather than just compensating landlords for various expenses. To determine whether renting or buying is more suitable for your location, using a Rent vs. Buy Calculator can provide clarity. For individuals with low to moderate incomes, various first-time homebuyer programs exist to aid in managing mortgage payments.
Reason 3: 'My credit history isn't strong enough for a mortgage'
A less-than-perfect credit history does not necessarily preclude you from obtaining a mortgage. Demonstrating responsible credit card use and consistent employment can lead to mortgage approval, notes AJ Smith, a personal finance expert. Moreover, options like lease-to-buy programs, seller financing, and loans from private lenders can accommodate potential homebuyers with suboptimal credit. It is worth noting that certain private mortgage insurance programs accept credit scores as low as 620. However, be aware that lower credit scores may result in higher mortgage rates and possibly require a larger down payment.
Reason 4: 'I lack any credit history whatsoever'
Even without a credit card, you can establish credit history by having your rent payments reported to credit bureaus. Anne Postic of Mortgages.com recommends inquiring with your landlord about this option, which Experian facilitates. This step can initiate the creation of a credit history for you.
Reason 5: 'My job tenure isn't sufficient'
While work history holds significance, Jeremy David Schachter from Pinnacle Capital Mortgage explains that even with relatively short job tenures, qualification is possible based on income and industry. A letter from your employer can substantiate your job stability and help mitigate concerns about recent job changes.
Reason 6: 'I can't find an affordable home I like'
The concept of finding the perfect home immediately can be a misnomer. It's important to recognize that crafting your dream home takes time. Starter homes are labeled as such for a reason—they mark the beginning of your homeownership journey, and not always your final destination.
All in all, owning a home is achievable — you just need to gain an understanding of the process and the know-how. You should consider the common misconceptions about homeownership mentioned above and attempt to make a change in your perspective and actions. With sound planning and dedication, you can purchase your own home before you know it. Scott and the Smolen Team have extensive expertise in real estate; contact them today to set sail on your home buying journey.
