Ask O: Obstacles to owning a home

*Dear Olivia,* *My wife and I really want to buy our own home and get out of the rental situation we’re currently in, but we don’t have a high enough credit score or a big enough down payment or to qualify for a mortgage. Is there anything we can do to overcome these obstacles?* *Signed,* *Desperate to Own* As it turns out, you are in a very familiar place as a lot of Americans feel like they are forever stuck renting and unable to afford a home of their own. But, there is some good news for you in that the perceptions surrounding a “good enough” credit score and a “good enough” down payment tend to be different from reality. There are also some misconceptions about what kind of debt to income ratio you need to qualify for a mortgage. Let’s look at each one of these factors, and hear what a new homeowner has to say about her experience as well! *The Reality of Credit Scores* According to a recent survey by Fannie Mae, more than half of renters don’t know what credit score they need to get a home loan. Of those that think they have an idea of what number is required, 5% think that it has to be at least 740. The truth of the matter is that you can often get a mortgage with a credit score that’s below 700. In fact, homeowners that closed on a Federal Housing Administration (FHA) purchase have an average credit score of just 687. So, if you have less-than-great credit, that doesn’t mean you can’t still get a home loan! You may not qualify for as much money, and your interest rate may be higher than someone with exceptional credit, but the fact remains that loans may still be available. *“Is homeownership possible? Yes. Take it from someone who thought it would be years, if ever, that home ownership would be something that was attainable.” - Leah Maltbie* *The Reality of Down Payments* This darling home with many updates located at 116 S 4th W in Riverton is listed for $130,000. If you paid full price and qualified for financing from Rural Development, your payment could be less than $750.00 per month (with approved credit). Look around and see what you can rent for that money, then decide - would buying be a better option for you? Another hurdle that a lot of prospective homeowners feel they can’t get over is the down payment. Of people that responded to the Fannie Mae survey, 40% didn’t know what kind of down payment would be required to buy a home, while another 15% felt that at least 20% of the purchase price would be necessary. Another 5% of respondents thought that homebuyers need at least 10% down. But, again, the truth is a little different from what many people think. FHA loans often require less than 3.5% down. Other programs, like those from the Veteran’s Administration (VA) and the United States Department of Agriculture (USDA), even have loans that don’t require any money down at all. *“[Our] mortgage broker told us it would be possible to go through the USDA rural home loan and buy a house. It was a long process with lots of work, but I did it. Not only do we now own a home for less than what we would be paying for in rent, it was done with no down payment.” -Leah Maltbie* The National Association of Realtors reports that, on average, a first-time homebuyer will need just 6% down. So, if you find a home you love, don’t immediately think you can’t afford an appropriate down payment because down payments are often much less than what many people think. *The Reality of the Debt-to-Income Ratio* If you’re worried about your credit score and your ability to put together a down payment, chances are you’re also concerned about your debt-to-income ratio (DTI). This is a very common problem in our country, with most households carrying a tremendous amount of debt, with student loans and credit cards being some of the most common. But aside from actually having a lot of debt, many people misunderstand what constitutes an acceptable DTI. Of respondents to the Fannie Mae survey, 59% didn’t even know what an acceptable DTI would be. Another 25% of respondents thought that DTI needed to be under 25% while 7% of respondents believed that DTI must be below 39%. *“If you are even considering home ownership, remember this, research pays off. Find the right lender and the right Realtor.” - Leah Maltbie* The fact is that most lenders prefer DTI to be below 36%, but if you have great credit or other positive financial factors working in your favor, you might be able to push DTI up to 45%. That means there many people in the U.S. that, at least from a DTI standpoint, may qualify for a home loan without even knowing it. *Final Thoughts* The bottom line is that just because you don’t have the best credit, the best DTI, or a stack of money to put down on a home, doesn’t mean that you still can’t make the dream of owning a place of your own come true in 2016! Come into Wind River Realty to see me or one of the other agents in our office, so we can help you determine what your needs and wants are, and how those compare to the kind of financing you might be able to get. #news #sponsored #wrrealty #county10