A new survey from real estate listing service Trulia revealed that 59 percent of renters aspire to be homeowners, but there are six main issues holding them back.
Let’s take a closer look at what they are, and what you can do to overcome them.
Saving Enough for a Down Payment
This is the biggest obstacle for prospective homeowners. But what many may not realize is that you can still get a home for as little as 3.5 percent down with an FHA loan.
So there are certainly options if you don’t have a ton of assets. There are even no money down options in some “rural” parts of the country.
Qualifying for a Mortgage
The second biggest roadblock is actually qualifying for a mortgage. This is why I stress preparation so much.
This means getting your income, assets, and employment information together long before applying for a loan.
In other words, holding a steady job for two years or longer, seasoning the assets you plan to use in your bank account (not your mattress) for several months, and getting pre-approved so you know what mortgage amount you can actually obtain.
A Good Credit Score
Along these same lines, you need pristine credit to ensure you qualify for a mortgage at the lowest interest rate. In fact, without a great credit score, your mortgage rate alone could make you ineligible for financing.
While there are mortgage options for those with low credit scores, you’ll be much better off it you apply for a mortgage with an excellent credit score.
Not only will you have a much easier time qualifying, you’ll also save a ton of money in interest over the years.
Another killer is existing debt. If you’ve got a ton of credit card debt and who knows what else, it’ll work against you when applying for a mortgage.
Mortgage lenders use a measure called debt-to-income ratio to determine how large of a housing payment you can handle.
Put simply, the more existing debt you have, the less you’ll be able to borrow for your mortgage. So pay down what you can before applying without exhausting your assets. This will also give your credit score a boost!
A Stable Job
As mentioned earlier, a stable job is very important for qualification purposes, and also plain confidence in knowing you’ll be able to keep making your mortgage payments.
Without a job you can count on, it’d be a foolish decision to purchase a home. After all, you certainly don’t want a foreclosure on your record.
Falling Home Prices
Lastly, there’s the issue of declining home prices. Yeah, it can be pretty scary to see your “investment” lose value. But when it comes down to it, a home is a home first, and an investment second.
Is it a good time to buy right now? That’s debatable. Mortgage rates are certainly at their lowest levels in history, which makes it attractive to carry a mortgage. But do home prices have some more downward pressure? Absolutely.
That said, I wouldn’t say there is a rush to buy a home, but now could be the perfect time to get your finances in order for a possible purchase next year.
Interest rates should remain low for a fair period of time, and if home values slip a bit lower, it could be an ideal time to finally become a homeowner.
Read more: How to get a mortgage.