courtesy flickr 401kcalculator.org
With the lack of available inventory, rising prices and more stringent mortgage guidelines, many buyers have chosen to abandon their search for a home and continue renting. It is a challenging market, but with incredibly low interest rates, and a bit of patience and planning, it may make financial sense to start paying your own mortgage rather than your landlord’s. A recent realtor.com article, “Top 6 Reasons to Not Buy a Home – Debunked” listed the most common reasons people don’t buy a home and the reality checks showing why that goal might be within reach.
#1 I don’t have enough for a down payment – In reality, few buyers purchase a home with 20% down. There are great FHA and conventional loan programs available for first time buyers with 3% to 5% down payments. Grants are another option for subsidizing a down payment. These typically require taking a home ownership course. Just remember, if you put less down, you’ll need private mortgage insurance (PMI).
#2 I can’t afford a mortgage payment – Monthly rents in the Seattle/Bellevue areas can approach or exceed a typical mortgage payment. There are rent vs. buy calculators available online to help you determine if renting or buying makes more sense, especially if you plan to stay in a home for several years.
#3 I don’t have a good enough credit history – You don’t need a 750+ credit score to qualify for a mortgage. Review your credit reports to be sure they’re correct, dispute any errors (this can take 60-90 days) and over the next 2-4 months make an effort to pay down credit cards and clean up your credit picture. If you don’t qualify for a mortgage now, that picture could change for the positive in less than six months.
#4 I don’t have any credit history – You can build credit history without a credit card. If you rent, provide verification that your rent payments have been on time (bank statements, a statement from your landlord); do the same for utility bills.
#5 I haven’t been at my job long enough – While work history is important, even if you’ve recently changed jobs you can still qualify for a mortgage, especially if your new job is in the same field and income range. If you’ve changed careers, a letter from your place of employment could help in confirming your job stability and growth potential.
#6 I can’t find a home I like in my price range – This could be the biggest obstacle facing buyers, especially first time buyers. Be realistic – don’t try to buy your last home first. You should find a condo or house that feels like “home”, but this will likely be the first home of two, three or more over the next several decades. You can move up to eventually buy your last or dream home.