Real estate inventory remains tight in locations across the U.S., and many buyers – especially those seeking starter homes – have become increasingly frustrated. In combination with today’s extremely low mortgage rates, it is not uncommon to be outbid more than once before finally getting your offer accepted. Inventory is particularly stretched for smaller homes because many of the current owners are “under water” on their mortgages – meaning that their homes are now worth less than what they owe their lender, so they would have a tough time selling. To add further fuel to the fire, builders are mainly concentrated at the high end of the market, where deals are much more lucrative. And with millions of young Millennials and new immigrants seeking first-time homes, supply has simply not been adequate to keep up with demand, jacking up prices to sky-high levels.
There are ways for first-time buyers to land that much-desired home, but it may take a bit of research on your part. Here are some tips to help get you started in the right direction.
Down payment percentages are not set in stone.
Conventional wisdom states that buyers need to put down a twenty percent deposit, but in actuality, nothing could be further from the truth. The deposit amount depends on the lenders’ individual requirements; many are as low as three percent and some require only 1% down. Lower down payments may trigger the need for mortgage insurance, though, so be sure to weigh all factors.
Entry-level options may be available through the Federal Housing Administration.
The FHA protects lenders by providing mortgage insurance to approved lenders throughout the United States – making them much more willing to take a chance on a buyer with mediocre credit.
You do not need perfect credit scores to qualify for a loan.
Your credit score may determine the size of your down payment or your interest rate, but a loan through the Federal Housing Administration only requires a credit score of 580. Conventional mortgages do require a somewhat higher score, but certainly not a perfect 850.
You may qualify for special rate programs.
If you are a U.S. veteran, active-duty service member, or member of the National Guard and Reserves, you may qualify for a zero-down mortgage through the Department of Veteran Affairs.
Set a reasonable housing budget.
Don’t become “cash poor” just to be able to purchase your dream home – you will still need reserves on hand to pay for repairs, food, health care and an occasional night out. Despite what many people think, it’s never a good idea to depend on a higher future income to afford your home – things don’t always go according to plan.
If you are overwhelmed by the mortgage options out there and need a hand getting started or evaluating possibilities, let us know. RateJab can help match you with the best wholesale lenders on the market, carefully taking into account your specific needs and objectives to find the ideal lender.