While most people would agree that homeownership is an excellent investment, there are those who put it off, or avoid buying a home all together. Why?
Here are some of the most common misconceptions keeping people out of a home of their own.
“We don’t have enough savings for a down payment”
There are many ways to buy a home with little or no money down. You could borrow against a retirement fund, and if you’re a first time homeowner, you can withdraw the amount without negative tax consequences. You may qualify for local, state, or federal down payment assistance program. There’s the Department of Veteran
Affairs (VA), Federal Housing Administration (FHA), and Farmers Home Administration (FmHA). The point is, you have alternatives.
“We can’t afford the mortgage monthly payments”
If you can afford to rent, you can probably afford to buy. When comparing a mortgage payment to a rent check, remember that mortgage interest is tax deductible, in most cases. It may lower the actual annual costs of owning as opposed to renting even after factoring in property taxes, insurance and home maintenance. Ask
your tax advisor for detail pertaining to your personal situation.
There are many loans that feature mortgage payments well below what’s commonly found with a conventional 30-year, fixed-rate loan. Check out the savings of adjustable-rate mortgages, or a graduated-payment mortgage. Another way to lower a monthly mortgage payment is to bring in a co-owner, or buy a duplex that’s already generating income to help cover your monthly mortgage payment. Ask your local loan officer about a possible Mortgage Credit Certificate (MCC) program in your area. Through MCC’s, the local government actually subsidizes your mortgage for $2,000 or $3,000 a year.
“We’ll never get a loan with our credit.”
Lenders are in the business of making loans. If you’re past credit history has some irregularities; there are still many loan programs available to you. Many people mistakenly believe that a short employment history or that being self-employed precludes them from qualifying for a home loan. But that’s not true in this day and age
where more and more people are self-employed, and it’s not unusual to change jobs several times over a career span.
“We need to find the property first, then get a loan.”
Actually, that’s backwards. There are many advantages to being pre-approved for a home loan before the search even begins. First, you’ll know how much you can afford, and what your payments will be. That narrows your search considerably, saving you time and money. As a pre-approved buyer, you’ll enhance your bargaining power with the seller. It shows them you are serious about buying a home and you have the ability to purchase now.
“We can’t buy because we plan to move in four or five years.”
Instead of putting off home ownership and all the money-saving benefits that go along with it-as well as gambling that home prices and interest rates won’t go through the roof-you could adopt a short-term purchase plan. One option would be to buy a fixer-upper at a depressed market price, make improvements and then sell it at or above market price in a couple of years. A mortgage can build equity for as long as you own the home. The only true roadblock to a home loan is a limited imagination. So stop throwing your money away on rent! When you rent, you are paying for a roof over your head for 30 days at a time, and building equity for your landlord, not you!