Home buying barriers exist – but research, creativity and flexibility will help you get rid of them.
Home buyers today face tough challenges – housing prices have risen, dollar is not going as high as before and renting is more expensive than in the past.
How do people today buy so big despite these obstacles? With more flexibility and some financial creativity, today’s buyers are finding ways to achieve homeownership.
Know your options (and credit score)
The first step to knowing if you can afford a home is to find out what financial options are available to you, including for what mortgages you are entitled to and how much you need (and can afford) to prepay.
Learning the minimum FICO score required by lenders and understanding your own credit score are important starting points.
Many home buyers aren’t sure how much they need to put on a home, what the minimum down payment loan will be (it’s not always 20%), or what programs are available to help with down payments, such as FHA loans. .
Before buyers even start thinking about saving for a home, they should know what their financial resources are and if they are allowed to buy.
Earn enough money to save
With fewer resources to extract than their older, wealthier counterparts, tenants willing to buy face tough financial setbacks.
According to the Zillow Group 2019 Consumer Housing Trend Report, tenant households typically earn a median income of $ 37,500 annually, which is nearly $ 40,000 less than the median household income netted by households that have recently purchased a home (of which the median household income is $ 75,000 annually).
Although there are ways to get into home ownership without earning $ 75,000 in household income, it’s hard to buy if you earn significantly less. “MeIf you earn $ 37,500 a year, it’s probably not affordable for you in almost any market, ”says Zillow, chief economist. Dr. Svenja Gudell.
While households buying homes are more likely to have two incomes than tenants (and thus a higher average household income combined), even two-income households struggle to buy in competitive markets.
Save enough money (but not as much as you think)
One of the scariest parts of home shopping? The down payment. In fact, two-thirds of renters cite saving for a down payment as the biggest hurdle to buying a home, according to the Report on Zillow Housing Aspirations.
For people buying the national median home valued at $ 229,000, with the traditional 20% down payment, that’s $ 45,800 down payment – just to relocate.
“The down payment remains an obstacle for a lot of people,” Gudell says. “But they need to know they don’t have to lower 20%.”
Although taking down less than 20% means additional considerations, such as the cost for private mortgage insurance (PMI), some think it’s worth the hassle. In fact, according to the Zillow Group 2019 Consumer Housing Trend Report, only a fifth of recent buyers (20%) put 20% down, and just over half of buyers (56%) put less than the traditional 20% down.
Buyers are also created about pooling a down payment from many sources. According to the reporting results, 34% of buyers who receive a mortgage also receive assistance in a gift or loans from friends and family to come up with a down payment.
Know your deals, but be flexible
Entering a home – even if it’s not the home of their dreams – some of today’s shoppers consider homes and places outside of their initial wish list and are more and more flexible when it comes to neighborhood, home condition and even home type.
“I think people get discouraged when they look in their target neighborhood and see homes around $ 170,000 when they’re looking for a $ 110,000 home,” Gudell says.
In fact cheap homes exist. But in popular places where people most often want to live, it will be harder to find that cheaper home, Gudell says.
“If you’re willing to make a longer trip and make some compensation, you might be able to find a home further away that could be cheaper,” Gudell explains. “You have to leave the paved road before you can find cheaper options.”