Have you told yourself that you’re too _____ to buy a home? The blank could be almost anything. Whether you think you’re too broke, too poor, or your credit score is too low, are you allowing an invisible script to prevent you from attaining your dream of owning your own home?
Just a side note: You may also be interested in Top 5 Myths About Home Buying in 2020
You don’t have to be rich. You don’t have to have a 750+ credit score. You don’t need $50,000 in savings. Don’t believe me? Sit back, grab a cold drink, and hear me out.
Big Down Payments Are Old Hat
If you can scrounge up ~$10k for a down payment, I wager that you can probably buy a home. It’s not a sure thing, of course, but hear me out. While a 20% down payment is excellent wisdom, it isn’t a requirement. Depending on the loan type, and where you buy, you could be required to pay less than 5% down to get into it. FHA loans require 3.5% down, which is less than $10k, assuming the median sales price of $248,867*. There are some conventional loans that require as little as 3% down. That’s ~$7,500, assuming a sales price of $248,867.
Let’s assume you don’t have the full ten grand lying around in a checking or savings account. Some, or even all, of your down payment can come from gifts from family, depending on certain restrictions. The point is that you maybe shouldn’t let your savings dictate your eligibility. Even if you haven’t been prioritizing your savings, how long do you think it would take to save up? I don’t pretend to know or understand your financial situation, but it may come down to something as simple as organizing your priorities.
* https://www.zillow.com/home-values/
Your Credit Is Probably Fine
The average FICO credit score in the United States as of September 10, 2019 was 706**. In fact, as of January 13 of this year, 59% of people in the US have a FICO credit score greater than 700, and only 18% have a credit score that is considered subprime***. For everyone else, there is probably a mortgage product or program that suits your needs. I don’t pretend to know you or to know about your finances, so take that with a grain of salt. None of this is a guarantee, but I’m guessing based on averages.
Even if your credit isn’t where you want it to be yet, there are such things a conditional approvals. To learn more about this, it’s best to contact a mortgage pro. I might have a suggestion about how to find one at the end of this article.
** https://www.fico.com/blogs/average-u-s-fico-score-ticks-706
*** https://www.experian.com/blogs/ask-experian/consumer-credit-review/
Your Personal Debt Balance Isn’t That Important
The total balance of your personal debt isn’t a very important factor in qualifying for a new home loan. Once again, I don’t pretend to have a clue about your personal finances, so forgive the section title. Your debt balance is important, but probably not when it comes to buying a home.
If you are worried about your student loan debt, don’t be. This kind of debt is a little more complicated, but it can be based on your monthly minimum due or 5% of the balanced divided by 12 months, unless you’re in deferment for more than a year past the closing date. Like I said, it’s complicated, but it’s probably not preventing you from buying a home. The only way to find out how your particular student loan arrangement affects your ability to buy a home is to talk to a mortgage pro. Don’t worry, we’ll get to that soon.
If you have any other kind of personal debt, only the minimum payment as listed on your credit report matters. No matter your debt, this is what you need to know. The equation is called the “debt to income” ratio, or DTI. This is a ratio of your monthly financial debt obligations and your monthly income. That helps determine how much house you can afford, when coupled with your down payment and creditworthiness.
Asking Never Hurt Anyone
If you dream of owning your own home, like I once did, the only way to really know what your options are is to talk to a mortgage pro. If you only remember one tip from this short article, this is it. Nervous? I understand. So do the pros here at Benchmark.
Find your local Benchmark branch, and reach out to them.Contact us however you want to find out more.Give me a call, or request one from me to explore your options.
Even if the answer is “not yet”, you’ve made the first step towards achieving your dream, and your Benchmark loan originatorwemy team will be with you every step of the way.
Benchmark brings you home.
