Most first time home buyers have several things in common. The first is that they are paying way too much for rent. In most instances, they could buy a home / townhouse and pay a minimum of 20% less a month. Hence, they are not building wealth, instead they are loosing money through high rents and no personal equity. Basically, they are building wealth for their landlords.
So why won't don't they buy. The most common thing that I hear is credit scores. Other issues are down payments and closing costs. All obstacles that can be easily over come.
Lets look at them and how I handled it for a client that just closed on a $220,000 house.
1. Credit Scores. Yes, it is true that big banks are wanting credit scores that are extremely high, in some cases above 700. The reality is that big banks only write a very small percentage of mortgages. Most mortgages are written by brokers, who have many different financial product. Where banks only have 1 or 2 products to offer, mortgage brokers have a dozen or more products. Bottom line with the right broker, I just found a client, a mortgage at 3.75%, for a 30 year fixed with a credit score of 580.
2. As far as down payments, many things can be done. Borrowing or taken money out of 401K plans is one option. Borrowing from family is another. If you are a veteran, you can use your VA, putting nothing down. If the house is in a USDA designated property, you can get 100% financing, bringing nothing with you at close. In the above example, my client had a few dollars in her savings and borrowed a few dollars from her family.
3. Closing Costs. Lenders can finance some of these costs absorbing it into the mortgage itself. A good agent should be able to negotiate some, if not all of those costs with the seller. In my example, the buyer paid all of her closing costs.
Bottom line: Find yourself a good agent that understand these obstacles and are aware of the things that can be done to over come them. Let your agent help you. They have the contacts and are well aware of the deals that are out there on the market. An experienced agent can get you financed and into a home. Don't be afraid to ask.
If you have any specific questions, please feel free to call me at 843.922.2003 or email me at firstname.lastname@example.org