You? Buy a home? If that prospect sounds as unlikely as your becoming the next U.S. president—well, this campaign season has shown us that anything can happen.
Sure, amassing the funds and slogging through the necessary paperwork for your own piece of the real estate pie can be daunting, especially if you’re a less-than-stellar loan candidate. Still, if you just assume there’s no way you could buy a home, without doing any research, you could be missing out.
Here are some oft-cited reasons people don’t buy a home, and the reality checks showing why they shouldn’t give up hope.
REASON NO. 1: ‘I DON’T HAVE ENOUGH MONEY FOR A DOWN PAYMENT’
This is probably the most common justification for not making the leap into homeownership. After all, few people have a huge chunk of cash lying around—and you need 20% down to buy a home, right? Wrong.
“Needing a 20% down payment has lingered as a myth for years and causes many potential home buyers, including those in the millennial generation, to miss out on getting into a home,” says Christina Bartning with National MI, a private mortgage insurer in Emeryville, CA.
AJ Smith, a personal finance expert at SmartAsset, points out that with a loan backed by the Federal Housing Administration or Department of Veterans Affairs, you can usually get by with a down payment of 3% to 5%.
In addition, “grants are an excellent way for young buyers with good credit and stable employment to subsidize their down payment,” says Realtor® Mike Murray of the Murray Home Team at Coldwell Banker in Annapolis, MD. “These can typically be obtained by taking homeownership courses or purchasing in designated community development areas.”
However, if you do put down less, keep in mind you’ll need private mortgage insurance until you pay down the loan to the 20% threshold.
REASON NO. 2: ‘I CAN’T AFFORD A MORTGAGE PAYMENT’
“Some people don’t realize the amount they pay in rent is more than if they had a mortgage,” says Realtor Kenneth Cagan of the Cagan Team in Coral Springs, FL. “Landlords are trying to recoup their taxes, insurance, maintenance fees and still make a profit. When you buy, you’re investing in yourself.”
To find out if renting or buying makes more sense in your neighborhood, try realtor.com‘s Rent vs. Buy Calculator.
For first-time buyers with low to moderate incomes, organizations such as Neighborhood Housing Services of Richmond have plenty of experience in helping.
“Laniesha, a young mother of two, gave us every excuse in the book as to why she couldn’t purchase a home, from ‘I don’t make enough money’ to ‘I am not married,’” says Samuel Robinson, NHSR’s marketing and public relations officer. “After explaining that none of these issues could stop her, we worked with Laniesha to pay off her debts and raise her credit score. She’ll be purchasing her new home in 2016.”
REASON NO. 3: ‘I DON’T HAVE GOOD ENOUGH CREDIT HISTORY TO GET A MORTGAGE’
So you’ve made some late payments, or have other skeletons in your past that have dinged your credit score. That doesn’t put a mortgage out of reach.
“If you’ve paid down your credit cards and kept a steady job, your application may be approved,” says SmartAsset’s Smith. “Potential home buyers with bad credit can also explore options like lease-to-buy programs, financing through the seller, and loans from private lenders.”
Get this: Some private mortgage insurance programs allow for credit scores as low as 620, Smith says.
Meanwhile, you can slowly improve your credit score by paying your bills on time and keeping your balances and inquiries low, says Murray. A licensed loan officer should be able to set up a one-year outline to get your credit on track.
But there’s one substantial caveat: Typically, mortgages for people with a lower credit score do come with a higher mortgage rate. And a very low score may require a higher down payment.
REASON NO. 4: ‘I DON’T HAVE ANY CREDIT HISTORY AT ALL’
Even without a credit card, there are ways to build credit history, says Anne Postic of Mortgages.com.
“If you’re a renter, ask your landlord about reporting your payments to establish a history. Experian makes it easy for your landlord to report your payments, or for you to do it yourself.”
REASON NO. 5: ‘I HAVEN’T BEEN AT MY JOB LONG ENOUGH’
“Work history is important,” says Jeremy David Schachter with Pinnacle Capital Mortgage in Phoenix AZ. “But even if you recently changed jobs and have only been there for a month, you can get qualified depending on your income and field.” A letter from your boss or place of employment will go a long way, so be sure to ask if you fear your relatively brief employment history might be an issue.
REASON NO. 6: ‘I CAN’T FIND A HOME I LIKE IN MY PRICE RANGE’
“People often think they have to buy their last home first,” says Fort Myers, FL, Realtor Angeline Sackett. But making a dream home a reality takes time. After all, they call first homes “starters” for a reason, right?