A recent study by the Joint Center
for Housing Studies at Harvard University revealed when renters were asked why
they do no plan to own in the future, financial constraints were a more common
response than the perceived lifestyle benefits they may receive from renting.
Today, we want to go over those financial challenges and see if we can put some
fears to rest and also clear up some misconceptions. Here are the top four
financial hurdles that cause renters not to buy:
You
Cannot Afford a Home
Well over 50% of renters consider this as a
financial barrier to homeownership. However, study after study has shown us
that there are major misunderstandings about what is required to purchase a
home.
The biggest misconception is the amount of a down
payment required. A recent
survey revealed that 44% of respondents believed that a
20% down payment was required. In actuality, mortgages are available with as
little as 5% down (and even 3% in certain situations).
The same survey showed that 30% of respondents
believe that only individuals with ‘high incomes’ can obtain a mortgage. In
actuality, there are several programs intentionally created to help moderate
income families buy a home of their own (look at the FHA program for example).
You
Do Not Have Good Enough Credit to Get a Mortgage
The survey mentioned above showed that 64% of
respondents believe they must have a “very good” credit score to buy a home.
Most people don’t realize that the average credit score for closed loans has
actually dropped 24 points in the last two
years. For more information on credit scores click here.
It’s
Not a Good Time to Buy a Home
Determining when is the right time to buy a home
from a pure financial calculation can be difficult. There are two elements of
the cost of a home: the price of the house and the mortgage interest rate. When
considering a purchase, you want to have at least an indication where prices
and mortgage rates are headed. According to over
100 experts, house values are expected to increase
by almost 20% between now and 2018. And Freddie Mac recently projected
that mortgage rates would be as much as one full
point higher by this time next year. With both prices and interest rates projected to
increase, now is the perfect time to buy a home.
It’s
Cheaper to Rent than Buy
This is a myth that doesn’t want to die. However, Trulia
recently reported that, in fact,
buying is actually dramatically cheaper than renting. Here is what they said:
“Homeownership
remains cheaper than renting nationally and in all of the 100 largest metro
areas. In fact, buying is 38% cheaper than renting now, compared with 35%
cheaper than renting one year ago.”
Bottom
Line
If you are even thinking about buying, get the facts
from a trained professional. You may be pleasantly surprised by what you find
out.
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