How Do Regular People Buy Homes?
2020 is in the books and resolutions have been written. For the past few days I am sure you have heard people say some variation of, “New year, new me!” Even though the calendar has changed to 2021, some things still remain the same. For one, mortgage rates are still near historic lows. More than likely, this means that 2020’s red hot housing market will carry over to 2021. Home sales were up for nearly every market in the nation, including Massachusetts. However, for everyone who bought the house of their dreams, there were just as many wishing they could do the same. That begs the question: why didn’t they? Many people have been sitting on the sidelines because they don’t think they are able to buy a house. However, buying a home isn’t just for the wealthy. Regular people can buy homes too. Here’s how to make it happen ...
Why Regular People Think They Cannot Buy a Home
Buying a new house is not out of reach, but lots of people think it is. People disqualify themselves from homeownership without ever even trying to apply for a mortgage. The two biggest factors that cause people to disqualify themselves without ever filling out an application are credit score and down payment. People assume that you need perfect credit, a 20% down payment or both to buy a home. If that were true, you would not see the type of real estate market that we had in 2020. There are ways around both for regular people who dream of buying their own house. The team at Peoples Choice Mortgage is here to let you know why your dream of owning a home is closer to reality than you think.
Don’t Let Credit Scores Stop You From Buying a House
You do not need perfect credit to qualify for a mortgage. All lenders have different requirements and there are even options for people with what is considered ‘bad credit’. There are several programs that are backed by the federal government that back mortgages for sub-700 credit scores. These programs are VA loans and FHA loans.
If you were a member of the armed services then you might qualify for a VA loan. There are certain requirements that you have to meet in order to take care of this program. However, if you meet these requirements, then there is a good chance of getting a mortgage in spite of your credit score. VA loans are not provided by the federal government. They are provided by private lenders but are backed by the federal government. Because they are backed by the government, they are more willing to provide loans to people with suboptimal credit. Some lenders will let you qualify for a VA loan with credit scores in the 500s.
FHA loans are another option if you do not have a perfect credit score. FHA loans are insured by the Federal Housing Administration and are designed to help out first time home buyers. Like VA loans, FHA loans are backed by the federal government, which makes lenders willing to qualify applicants with imperfect credit. Some lenders will provide FHA loans to first time home buyers with credit scores in the 500s.
Don’t Let Down Payments Stop You From Buying a House
With house prices increasing dramatically this year, some are too scared to try and buy a home because they fear the down payment. Potential buyers incorrectly assume that you need 20% of the cost of house to use as a down payment for a mortgage. This is simply not the case. There are many programs available in which you need far less than a 20% down payment to qualify for a mortgage.
Two federal government programs that were already discussed provide mortgages to individuals for down payments less than 20%. VA loans require no down payment. If you can qualify for a FHA loan then you will only need to come up with a down payment of somewhere between 3% and 10%. These are not the only programs offered by the federal government that allow you to qualify to buy a house with a smaller down payment. USDA loans are another federally insured loan program that is designed to help people buy suburban or rural homes. If you meet the qualifications to get a USDA loan, then you will not be required to make any down payment to buy a house.
The federal government is not the only entity trying to help regular people buy homes with less than 20% for a down payment. State governments, city governments, and counties have their own programs, too. The Massachusetts Housing Partnership has a program for first time home buyers called the ONE Mortgage Program. This program is designed to help people with low to moderate income get their first house. They will help you get a 30-year fixed rate loan with only a 3% down payment.
For some, even a 3% down payment seems like it might be too much to handle. This is especially true for people fresh out of college, young families, or people without a lot of savings. However, there are programs that can help you get the money for the down payment. MassHousing has a Down Payment Assistance Program that can provide first time home buyers with up to $15,000 for a down payment. This is given in the form of a 15-year loan at 2% interest. Some cities have their own programs. The City of Brockton has a program with the Brockton Redevelopment Authority has their own First Time Homebuyer Program. This program will also provide up to $15,000 for a down payment. Down payment assistance programs like this exist in states, counties and cities all over the nation. You just need to find them!
Final Thoughts
If you have dreams of owning a home do not disqualify yourself before you try. The dream of owning a home is closer to being a reality than you think. Every lender has their own loan qualification standards. It is all about getting in touch with the right lender. It then becomes a question of how do you find the right lender for you. The answer is simple. Get in touch with an experienced independent mortgage broker.
Independent mortgage brokers work with hundreds of lenders and know all of their qualification standards. All you need to do is be honest with your mortgage broker and let them know the truth about your financial situation. If you can do that, then it is our job to find the right lender for your situation. Aside from just finding the right lender, we can also get you in touch with helpful programs that you qualify for. Again, there are down payment assistance programs and special loan programs all around the country. Sure, you can take the time to research each one that is available in your area. However, you can also speak to an independent mortgage broker that will tell you everything you need. Our passion is helping our clients buy a home. Let us help you make your dream a reality.
The bottom line is that you should not disqualify yourself from getting a mortgage before you try. Speaking to a mortgage broker can help you find out exactly how close you are to getting a house. It is possible that you do not qualify right away for a mortgage. However, working with a mortgage broker can let you know what you need to do in order to qualify for a loan in the near future. You can’t count yourself out before you try. Regular people buy homes all the time. There is no reason why that cannot be you. You do not have to rent forever. Contact a mortgage broker today and figure out what your next step is to own a place of your own.
