What is stopping you from buying your first home?
Common reasons buyers don’t take the leap to owning a home:
Too much down payment is needed.
There are many people who believe twenty percent down is the only option out there. There are several options for home buyers today from low to zero down payment loans. This makes it possible for so many consumers to own a home. Check out these loan options.
USDA Home Loan: If you live in a qualified area, there is a loan program called a USDA Home Loan (United States Department of Agriculture Rural Development). It requires no down payment. You heard that right. No down payment! And don’t be fooled into thinking you must live on a farm to qualify for this type of loan. Check with a Mortgages Unlimited Mortgage Consultant to see if the area you want to buy a home in falls within the geographical area for a USDA home loan.
VA Home Loan: This is another zero percent down home loan. Most members of the military, veterans, reservists and National Guard members are eligible to apply for a VA loan. Spouses of military members who died while on active duty or as a result of a service-connected disability may also apply.
FHA Mortgage: The FHA allows a down payment of just 3.5 percent. They are popular with mortgage borrowers because of lower down payment requirements and less stringent lending standards. The FHA will typically insure a home loan for borrowers with low credit scores so long as there’s a reasonable explanation for the low credit score.
Conventional 97: 3% down payment: The Conventional 97 program requires a 3% down payment, at minimum. The 3% minimum is based on the lower of the home’s appraised value or purchase price. 3% on a $250,000 home purchase is $7500 for down payment. By comparison, an FHA mortgage would require at least $8750 down.
There are plenty of loans that also offer grants for down payments and closing costs (OHFA, Recent College Graduate, Etc.).
Won’t be able to afford to maintain the home:
This is a good and responsible fear to have. However, there are so many maintenance free products for homes now. Also, when you are looking at homes, look for the following to be certain that you won’t be getting yourself into financial stress.
-Buy a home that has been well-maintained.
-Buy a home that has recently had major components upgraded or replaced (e.g., -new roof, new water heater, new plumbing, new electrical)
-Buy a new(er) home
Regular maintenance to your home will prevent small problems from becoming major repairs. Go into the purchase with a generous emergency fund set aside for home maintenance and add to that fund every month. Once the inspection is done, you will have a better idea of the condition of the home.
Having buyer’s remorse.
Don’t allow yourself to be talked into a house just because it’s in your price range. You should have a list of must haves for your home. It is your home and you are paying a hefty price for it.
With that, if a finished basement is on your list and it’s the only thing missing, a basement can be finished after the sale closes. And then you can make it however you want. On the flip side, if the basement is done and the layout does not suit your needs and it isn’t possible to change, you may want to reconsider purchasing it.
It boils down to what is important to you, not your Real Estate Agent…or your mother.
What if I cannot pay my mortgage?
Home buyers wonder how they will afford their mortgage if they lose their job. To address this, make sure to have a large emergency fund set aside. You can use this money to continue paying the mortgage if you lose your job. Contact your mortgage company if in fact, you do run into financial hardship to see if there are options to help you. They do not want to you to lose your home.
Know your budget so you know what your existing expenses are and how much money you take home every month. Also, think about new expenses that will come with home ownership, like water and trash bills.
Unexpected medical bills are a common source of financial instability so make sure you have health insurance.
Getting into a loan you didn’t understand fully.
Do yourself a favor and educate yourself! There is hardly a thing you cannot find on the internet or at the book store. Seek advice from others who have a bought a home. Ask questions to your Mortgage Consultant. There are loans that may not be the best fit for you so be sure you know what you are getting into.
Stick with a 15 to 30 year fixed rate mortgage if you are unsure. They are basic and fool proof. Also, with the new TRID rule, everything is transparent. This new rule was established by the CFBP (Consumer Financial Protection Bureau) to protect the consumer.
We are looking for life-long relationships with our clients that feel they can trust us with their family and friends. We are a company of integrity and it would be in our best interest to make sure your experience is stress free. Give us a call at 330.687.0302 if you’d like to talk about the home buying process and get a listed of our trusted lenders.
-Brendan Taylor, RE/MAX Trends