If the thought of ever being able to buy your own home seems impossible, and you’re sure you’ll never be able to do it, it may be time to think again. It’s true that there are a number of obstacles in between you and your dream property, but obstacles are made to be overcome, and with a little careful thought and planning, you can do it just like many others can and do too.
Although there is no problem with renting and many millions of people enjoy the freedom that it brings, if owning a house is what you want to do then there is no reason not to try for it. Here are some of the ways you can overcome the challenges in your way and buy that property you’ve been wanting for some time.
The Down Payment
Even if everything else is in place and you check all the correct affordability boxes, it’s the large down payment that needs to be paid that can cause some huge problems. No matter how great a job you might have or how much money is coming in each month to pay the mortgage plus all the bills, without the down payment – a figure usually set at around 20 percent of the value of the property – the majority of mortgage providers won’t even consider you.
However, although it sounds like an insurmountable problem, it could be easier to deal with than you first thought. Although 20 percent might be the figure quoted, that might be negotiable, and it is always worth asking your bank or another mortgage lender, or perhaps discussing the options with a mortgage broker or your realtor, to see if there is any movement on the amount of down payment you need to provide.
Whether this is allowed or not will depend a lot on your other financial commitments and how good a candidate you are for the mortgage otherwise. Remember, the lower the down payment, the more you will be borrowing on your mortgage, so the monthly payments will be larger. You will also need to take out homeowners’ insurance, and this helpful page will give you more information.
Poor credit can be another major obstacle when it comes to buying your dream house. Even if you have the down payment, it can still cause problems because a mortgage lender is going to be much less likely to want to lend to you if you have had credit problems in the past, or are suffering from them now. Even if you can get a mortgage, the interest rate is likely to be extremely high.
If bad credit is the issue that is stopping you from buying a property, then the only option you have is to fix that credit and make it better so that someone will lend to you. There are a number of different ways to do this, and although they will all take time and delay your mortgage application since you would be turned down anyway, it makes sense to use the time wisely and fix your credit in the meantime.
- The first step is to check your credit report to see what the reason is for the bad score. It might be that a mistake has been made and you have been linked to another person, for example, or that a debt still appears that was paid off many years ago. Although mistakes like this are rare, they can still happen, and if this is the case, then you can amend it.
- The next step is to work on paying off all your debts. Work out which ones have the highest interest and pay them off first, paying as much as you can each month without putting yourself into further financial difficulties.
- This can also help you to save for your down payment; once the debt is paid off, you can keep paying the same amount but put it into a special bank account solely for your down payment. It will build up quickly, and you won’t find it so hard to save.
Knowing your budget when you are looking for a house to buy is essential – you don’t want to find the perfect property only to discover afterward that you can’t buy it because it is too expensive. Once you have your budget, you can start to look around to see what you can afford. It might be that you can’t buy something big enough to accommodate your family, or that the area you are looking at is just too much for your budget, and this can be disappointing. If you really can’t increase your budget – and it is important not to even try to if it is going to cause you financial problems – then look at how you can compromise. If the area is set in stone, then you may need to have one less bedroom, or no parking or a smaller yard. If you have to have three bedrooms, then you may need to start looking a few miles out. There will be a property for you if you are willing to compromise.
Something that not many people are likely to talk about is the fear that comes with buying a property, whether it is your first of you’ve done it a number of times before. You will be taking on a big debt, and it’s a huge commitment over a very long time (most mortgages last for 25 to 30 years). The idea of spending that much money and being tied in for that much time can be frightening, especially if you’ve never done it before. Don’t let fear put you off, though, if that’s what you want to do. You will be spending a similar amount of money on your rent over that period too; only the rent will keep needing to be paid as there is no balance to pay off. When you have finished paying your mortgage, you will have a property that is all yours, so it will be worth it in the end.