How to Overcome the Most Common Barriers to Homeownership
Think you can't buy a home? Think again.
In November 2013, Trulia surveyed renters who want to buy a home, asking about the obstacles that hindered their goal. The survey respondents cited several barriers to buying a home, all of which are listed below.
Let's explore these obstacles to homeownership, and look at how you can overcome each of them.
Qualifying for a Mortgage
The ability to qualify for a mortgage is actually made up of several factors. Let's look at the factors that buyers find most problematic:
Not Saving Enough for a Down Payment
A whopping 55% of survey respondents named saving for a down payment their biggest obstacle when it comes to buying a home.
Why is this a problem? Many lenders want you to put down 20% of the sales price of a home in order to avoid being hit with mortgage insurance fees. Considering the average cost of a home these days is around $200,000, this can be a hefty sum to come up with. But it's not impossible.
If owning your home is your dream, start prioritizing it. Take a long, hard look at your current budget and pinpoint where you can cut back. Can you rent a smaller apartment? Can you move back in with mom and dad temporarily? Can you take on a second job?
Put the money into a high-yield savings account. And don't succumb to the urge to cash in a life insurance policy, borrow from your 401k, or put your savings into risky investments in the hopes that it might grow faster. These acts aren't worth it in the long run.
Having a Poor Credit History
Your credit score is a number issued by FICO, the Fair Issac Corporation. It's determined by the credit history collected by three major credit-reporting bureaus: TransUnion, Experian and Equifax. (You'll actually have three credit scores — one with each bureau. Lenders generally look at the median score.)
Most lenders consider a credit score above 740 to be healthy, while anything below 600 is considered poor.
If you don't know your credit score, it's time to get familiar with it. You can (and should) get a free report from each of the three credit bureaus each year. You can access all of these at annualcreditreport.com.
(Note: You'll get a credit report, which won't tell you your numerical FICO credit score. But it will display your credit history, including any negative marks that might be on your record.)
This article How to Overcome the Most Common Barriers to Homeownership originally appeared on Trulia Tips.
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