There are many renters that would love to buy a home, but there are a few things that may be holding them back.
The biggest issue most renters have is the down payment. Many people think they need 10 to 20% down but that's not the case. You can get a FHA mortgage with as little as 3.5% down. If you are a first time homebuyer (have not owned a home for at least 3 years), you may be able to qualify for down payment assistance and get a conventional mortgage with 3% down – part of it can come from the down payment assistance. If you have VA eligibility you can get a VA mortgage with zero down! I recently talked to someone that was looking at renting and the rental company said they would need the first month of rent, a deposit equal to a month's rent and possibly the last month of rent up front before they could rent – that may not be the norm, but with that much money needed, they may have enough to buy a home! I always suggest to clients that are short of money to try and save the new monthly payment – that may allow them to save money sooner and they will be used to the payment they may be making on a new home.
The next thing holding back renters may be their credit score. Sometimes their credit is good, but they may have too much on credit cards. By keeping the balance on your credit cards at about 30% of the available credit, it will help your credit score. Pull your credit report with your loan officer to see where it's at or use www.annualcreditreport.com to get a free report to see what is on your report and if there are any errors. Remember you will need at least 2 years after a bankruptcy and 3 years after a foreclosure for an FHA mortgage, longer for a conventional mortgage.
A stable job is important. We need to verify 2 years of employment and ideally want to see 6 months on the current job. If you have just changed jobs, that's ok, but underwriters do not want to see any gaps of employment.
Qualifying for a mortgage- this isn't that difficult as long as you have good credit and stable employment. Keep your debt down – that can definitely affect how much you can qualify for in a home. You will need to show your loan officer 2 years of w-2's and tax returns, 2 months of bank statements and at least 2 paystubs.
Some people feel that home prices may be declining – most areas have been appreciating over the last year or so. It's hard to buy a home and know that some people have lost what equity they had in their homes, but hopefully we won't see that again. Remember that it is your home and not necessarily an investment – you are living in it and hopefully will be there for a while!
Right now interest rates are great, they have improved a little bit this fall, we don't know how long that may continue. Home prices are good, they are expected to increase slightly over the next year. So this may be a great time to buy a new home!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, NMLS#150953 – Email – Website
