Millions of Americans are renting their home. For some households, it’s by choice. However, many renters realize the benefits of homeownership, but reluctantly continue to pay their landlord, thinking that buying a home is simply not attainable.
Many obstacles stand in their way, such as affordability, down payment and student loan debt. Some of these barriers are very real and well documented. On the other hand, there is still a lot of misinformation on what’s required for qualification and a down payment. Plus, even if renters do not qualify today, they may not realize how quickly they can improve their financial picture.
Keep reading to learn about 3 common struggles people face and how you can overcome these obstacles.
Saving for a Down Payment
One of the biggest challenges for potential buyers is to scrape together the down payment for the home they want to buy. Saving up any amount of money can seem daunting, let alone 20% of a home’s value. However, there are many misconceptions out there that keep a lot of renters from realizing that they are capable of making a down payment.
One common myth is that a 20% down payment is required. But the fact is you don’t need to put down 20%. Conventional loans for first time buyers only require 3% and repeat buyers 5%.
Michigan FHA Loans only require a 3.5 % down payment and there are other loan products that provide downpayment assistance or 100% financing. This can be a game changer for renters that find it challenging to put down 20%.
Fortunately, poor credit is one of the easiest barriers to overcome on this list. Potential buyers may be surprised to learn just how quickly they can improve their score by doing things like fixing errors on the report and paying down credit card debt. A Michigan lender like Julie Krumholz can show you how to prioritize items on your report to ensure you pay off debts that will have the largest impact.
There are also a few different types of loan programs that will lend to those with lower credit scores, such as Michigan FHA loans which only require a 580 score *. Depending on the loan, lower credit scores may result in a higher interest rate or down payment. But it’s important to realize credit alone should not stand in your way of pursuing homeownership.
* Right now, due to COVID underwriting guidelines, the required FHA score for most lenders is 620.
Low inventory conditions have increase home prices leaving many prospective buyers feeling they are unable to afford even a median priced home.
The good news is right now mortgage rates are lower than usual, which increases the affordability of homes because your dollar just goes farther with a mortgage payment.
If buying a home is still financially out of reach, it’s wise to not overextend yourself with a mortgage. As frustrating as it can be, perhaps you need some additional time to prepare. However, renters should not be overwhelmed, thinking it takes years to prepare financially, and simply knowing this fact can motivate Americans to pursue their dream of homeownership.
The key is to stay informed of what loan products are available and what exactly you need to do to qualify. Consult with a mortgage lender early to learn how you should plan ahead to purchase in the future.
Looking for a Michigan FHA Lender?
Do you have questions about the real estate market or looking to get pre-approved?
Julie Krumholz is has been helping Michigan homebuyers for over 35 years and has several loan programs available for various incomes and financial situations. If you are looking for a mortgage lender in Rochester or anywhere throughout Michigan, call Julie from Superior National Bank today at: 586-382-5482 and let her help you navigate through the loan process and answer any questions you may have.