Spring is around the corner, and there may be one thing on your mind. You look for it online. Driving around gives you lots of examples to check out. It’s the one thing you want. Yep, you’ve got your dream home on the brain!
Visions of finding, purchasing, and moving into the home you’ve been waiting for can bring a smile to your face. And yet, you haven’t put in an offer — and don’t really plan to. Something in your mind is holding you back. If it’s any of the things on this list, it’s time to breathe a sigh of relief.
1. Nonexistent Credit History
If you’re a young buyer, you may not have the one thing required to be a homeowner. Credit history is the way banks judge whether you’re reliable enough to take on a mortgage payment. It sounds simple, and it is — unless you’ve never had a credit card or bought a car. Getting approved for credit when you don’t have credit can be an uphill battle. So, what do you do?
A secured credit card can be the answer. This type of card can help you build credit history without asking lenders to take a risk on you. You’ll deposit an initial amount or use a funds transfer to set a credit limit. From there, it works like a typical credit card.
Making on-time payments turns into positive credit history. The more reliable you are, the higher your credit score grows, and your performance is reported to the credit bureaus. Before you know it, you’ll have a solid credit history and lenders will give you the seal of approval.
2. Not-So-Stellar Credit Score
No doubt you’ve heard about the holy grail of the credit game: the 850 credit score. It might as well be covered in gold. If you have a score anywhere close to that number, you’ll get the lowest interest rate available. But what if your credit history isn’t perfect?
The answer’s easy. Don’t freak out. Getting over this hurdle means flipping the script in your head. An average credit score (which for most Americans is around 680) is more than acceptable when applying for a mortgage. That means most homeowners are nowhere near that 850 mark.
If you’re still worried, though, you can take a couple of quick steps to boost your score. If you have a loved one whose score is closer to 850, become an authorized user on their card. Apply for store credit cards to increase your amount of available credit — that’s a big part of your credit score. No matter what, though, remember you don’t need a perfect score to land that dream home.
3. Too Little Cash for 20% Down
Just like a credit score, there’s a sweet spot for a down payment on a house. Real estate agents and banks will suggest you put 20% down. It lowers your monthly mortgage payment, but it also signals to lenders that you’re a safe bet. For a $300,000 house, though, that means you’ll fork over $60,000!
If you don’t have that much cash lying around, that’s OK. Taking out private mortgage insurance (PMI) lets you put down less and only increases your monthly payment a little. You can get an FHA loan with as little as 5% down. VA loans for veterans need as low as 3%. If you’re a first-time buyer, your state and the federal government offer assistance programs.
4. Fear of Lenders
Maybe you’ve tried to apply for a mortgage in the past and had a bad experience. Were you rejected or ghosted by a lender? If so, you may have a bad taste in your mouth for the home-buying process. In these cases, remember the process is basically the same everywhere, but the lenders aren’t all cut from the same cloth. This time can be different.
To be successful, you’ll need to do some (lender) shopping as many have different fees and rates. This one may charge some upfront fees, but the one down the street doesn’t have any. Some may give their employees a commission. Great for the employee — but that’s more money out of your pocket. Check them all out and see which one will work best for your situation.
Think about more than finances here, too. You want a lender that works with you rather than one that only sees you as a walking dollar sign. Choose a lender that asks you questions about your home-buying goals and your current financial needs. A lender who invests time in you will be a much better partner in your dream home search.
A final thought on dream home
It doesn’t matter whether you’re a first-time, hopeful homebuyer or an existing owner searching for an upgrade. Looking for a house is an exciting — and stressful — adventure. The process is lengthy, with lots of boxes to check around every corner. To reach your closing date, though, you must take your first steps into the housing market.
Don’t be intimidated by what you consider to be the financial hurdles in your way. They’re smaller than you think. If you follow these tips, you could soon be turning the key to the front door of your dream home.
Article Submitted By Community Writer
